Are Flippers Negatively Impacting the Real Estate Market?

house upside down
Rising prices are fueling the practice of house flipping, which have some worried about another inflated housing bubble. However, others argue that flippers have a positive impact on the market, creating beneficial transactions for agents and fixing homes in disrepair which increases the overall value of the neighborhood.

In California, homes bought and resold within six months have hit a record high since 2005. Approximately 6000 homes have been flipped in the state this year through April, accounting for more than 5% of all homes sold statewide.

Six of the largest ten price gains in major U.S. cities have been in California. In April, San Jose, San Francisco, and Sacramento all saw home values rise by 25% from the previous year. Los Angeles prices rose by 18%.

Prices are rising because of the shorter supply of homes for sale. Homeowners seem to be holding out for higher prices. Classic economics: A decrease in supply leads to an increase in price, all else held constant.

Today’s flippers are financially stronger than they were from 2003 to 2006. Banks are not making loans to buyers without large down payments. Investors are also buying up “fixer” homes, revamping neglected properties that would-be homeowners might not have the patience or cash for otherwise.

Flippers argue they are doing their part to create better living spaces for future homeowners, but critics argue they are taking advantage of the low supply of homes in the market.

Is the business of flipping homes negatively impacting the real estate market or improving opportunities and properties for agents and homeowners? Share your thoughts in the comment box below.

Find out more on WSJ.com from Nick Timiraos.

  • Sherri Noel

    We work with flippers and owner users. Most owner users want a house that is in move in condition so they can get on with living their lives. The negative effect is most likely on the local builders and handymen that don’t get the fix it jobs that a flipper gave to his own crew. The benefit of all the recent flips is that the higher prices now allow people that bought at the top of the market to sell without a loss adding to the low supply inventory.

  • Jory Blake

    Thank you for covering this subject….For the record, inventory will remain low for at least 6 more years. Flippers are great for everyone in any market, not sure how these critics feel it hurts inventory…maybe they are confused with the “buy and hold” folks.
    Folks- A homeowner who sells in order to purchase another resale does not create inventory.

    Jory Blake

  • Ryan Meltcher

    Strong flippers, who know what they are doing and aren’t taking
    unnecessary risks have largely impacted the strength of the local real estate
    market in recent years. Week flippers, armature investors who don’t care about
    the long term impact and the overall growth of our local market or the people
    and neighborhoods they impact, give “flipping” a bad name. When it’s done
    correctly, (with care) flipping creates jobs and helps strengthen the economy,
    less vacant homes equals less crime and undesirable behavior in our
    neighborhoods. The distressed homes are generally the eyesores, in the worst
    condition, contributing to the downfall of value and desirability of our own
    homes. When a seasoned flipper correctly renovates and beautifies the worst
    home on the street, ALL of our values strengthen, and the economy follows. – Ryan Meltcher, Owner // TNG Designer Homes
    // The Investment Division

  • Peg Popken

    Some flippers do a paint and cover job to sell a home but many correct flaws that keep a home from being lendable. It may be a new septic system a title flaw and or, pest work. now the neighborhood has a better look and a family has a good, safe home and the flipper has made enough money to feed his family stay off welfare. The banks make a loan, the agents and title people earn enough for one more month . I hope they continue they keep neighborhood from being slums.

  • Paul Script

    So has the Obama admin proposed flipping be outlawed? If you mention the word flip online will the NSA tell the IRS to audit my taxes? Remember: when flipping is outlawed, only government officials and their friends will be flipping.

    Better to discuss the color or Dwayne Wade’s shoes.

  • Joe Flipper

    I don’t always flip, but when I do, I do it carefully … to make as much money as possible.

  • Danton Paul

    Our Bank can now finance self-employed homeowners and buyers in California by using just 12 months of personal or business bank statements. We do not care about tax returns! If you have been denied a home purchase or refinance mortgage simply because you write off most of your business expenses on taxes please call Sr. Loan Officer Danton Paul at 619-646-2413 for details.

  • Joe Charogoff

    Yes, they do, but they are not alone. America, ‘yes I’m American’, is a place where money takes precedence over everything. Flippers are in the business of making money. They don’t take a10k profit when they they can take 50. Buyers, typically much poorer people, eat the cost- it’s that or rent- renting screws you worse.

    Lenders, the IRS, agents and everybody does the same- suck what money you can from hard working Americans and forget the rest. They all hurt the market. We live in a super wealthy country yet most people can’t afford a house… 44k a year per household… pretty simple.