House flipping is becoming a hot trend once again. A recent report has revealed that housing flipping in the United States has reached a 10-year high and experts are expressing concerns that this might be a sign of another housing bubble.
House flipping refers to the buying of an existing home and then renovating it with the aim of selling the property for some quick profits. RealtyTrac looked at transactions that happened for a property twice within a 12-month period in 110 metro areas in the country.
According to RealtyTrac, home flipping rose to its highest level since 2005 with investors gaining an average of $55,000 per sale before renovation and transaction costs, NBC News reported. In expensive markets like New York and Los Angeles, this could go to as much as $100,000. The report noted that when house flipping reached its peak 10 years ago, a mortgage market collapse, banking crisis and recession started two years later.
"When home flipping numbers go up, it is usually an indication that the housing market is in trouble," said Matthew Gardner, chief economist at Windermere Real Estate, as quoted in the report. "These sales artificially inflate home prices, making housing even less affordable for buyers and increasing the risk of a bubble."
The Bay Area, Silicon Valley and San Francisco/East Bay are the three most profitable places for home flipping, RealtyTrac said.
The news comes amid continued increases in house prices. According to market monitor CoreLogic per iExpats, prices of homes rose 47 months in a row already at 6.9 percent year-on-year rise in January. A recent poll conducted by Reuters predicted home prices to climb 5 percent in 2016 and then continue with solid gains in 2017 at 4 percent. Analysts say that the U.S. is poised to experience sustainable housing recovery and despite the impending Federal Reserve's interest rate hike, mortgages are likely to remain low.
