House flipping back to pre-crisis levels

Although house flipping has risen to nearly the same level as it was during the 2006 peak of the housing boom, a new CoreLogic Inc. analysis suggests that most of the current flips are less risky – and there would be less market volatility if prices decline in the next few years.

According to CoreLogic, flips accounted for about 10.6 percent of homes sold in the fourth quarter of 2018 compared with 11.3 percent in the first quarter of 2006. The 4Q 2018 percentage was the highest fourth-quarter level for flips – defined as homes that have been owned for less than two years – since CoreLogic started tracking the data two decades ago.

However, today's home flippers have significantly larger profit margins than those at the peak of the previous housing cycle, giving them more of a cushion if home prices begin to flatten or fall: They made a median economic profit of almost 23 percent in the fourth quarter compared with 9 percent in the first quarter of 2006.

In addition, the flip market currently is dominated by professionals purchasing older homes that likely need work.

CoreLogic finds that the median age of a flipped home today is 39 years – about a decade older than in 2006.

"Flippers are very different today than they were in the past," says CoreLogic deputy chief economist Ralph McLaughlin. "Even though we see hype and hysteria in popular culture, this isn't necessarily something to worry about."