Home Flipping Helping to Ease Affordability?

October 25, 2016

Investors have re-emerged in home flipping, scouring markets to find homes they can make over for profits. The practice -- once blamed for helping to fuel the housing crisis a decade ago -- is now a welcome sign to some city officials who say it’s helping to solve an affordability crunch they face.

States like Florida and Nevada continue to have a large stock of foreclosed homes and flippers are stepping in to renovate homes that help to battle neighborhood blight and then offering more options for first-time and low-income buyers. In many cases, the homes being flipped are selling well-below the rest of the market. Industry analysts point to that as a sign it is filling a shortage of affordable housing.

“This flipping activity could be seen as a social good if it’s bringing houses up to standards and putting them back on the market,” Steven Swidler, an Auburn University professor who has studied home flipping, told The Chicago Tribune.

Still, flipping can drive up home prices too, he cautions.

“In other areas,” he says, “it could be putting it beyond the price points for affordable housing for some people. It’s all about location, location, location.”

Nevertheless, today’s flippers are not the same as they were from years ago.

“Conditions are different now. You can’t just buy a house and expect to make a profit,” Swidler says. “In many cases (flippers) have to go in there and replace wiring, put in new refrigerators. Some of these places had holes in the walls. It took extensive work to renovate them.”

Rae Sovereign, an affordable housing activist in East Nashville, says the city has been facing an affordability crisis with its housing stock as developers tear down houses to build rentals. However, flippers are helping to bring more affordable housing to its residents, she says.

“Bringing these houses back to the market is good in general for the neighborhoods where they are located,” adds Hector Sandoval, a University of Florida economist. “It increases the supply, which means prices can’t go too high, and they should be affordable, at least for the middle class.”

Home flipping zoomed to its highest number since 2010 in the second quarter. A total of 51,434 single-family homes and condos were flipped, up 14 percent from the previous quarter, according to data from ATTOM Data Solutions.

The markets seeing some of the highest number of flips – where one in 10 homes sold in the second quarter was a flip – were in Tampa, Fla.; Memphis, Tenn.; and Visalia, Calif. The states with the highest overall rates of flipping – with 7 percent or more of homes sold within a year flipped -- are Florida, Tennessee, and Nevada.

Source: “Return of Flipping Eases Affordable Housing Crunch in Some States,” Chicago Tribune (Oct. 24, 2016)