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THE RETURN
OF HOME-
FLIPPERS
House flipping is on the rise. Data from
CoreLogic indicates the home-flipping rate
has increased year-over-year for 12 consecutive
quarters, and on a seasonally adjusted basis
is now at the highest level since CoreLogic
started keeping track in 2002, at 10.9% of home
sales as of Q 4 2018.
A new player in the home-flipping game is
the "iBuyer." According to Sean Black, CEO
& Co-Founder of Knock.com, writing for
Forbes, iBuyers are companies who buy homes
through instant offers, often spending only
a few thousand on repairs and reselling for a
smaller profit than traditional home flippers.
ese iBuyers companies are expanding,
selling more and more homes each quarter,
but according to Zillow, which is increasing
its iBuyer segment, margins on these instant
offers are "razor thin." Meanwhile, the returns
for traditional flippers has risen.
"In addition to flipping rates, we also
estimate economic returns to flipping," said
Ralph McLaughlin, Deputy Chief Economist
at CoreLogic. According to McLaughlin,
returns for flippers have risen significantly,
up to a median of around 40% after 2007.
Additionally, he notes that flippers are shifting
away from price speculation and toward adding
value to properties.
Returns are particularly high for older
housing. CoreLogic found that profits
are highest in Detroit, Philadelphia, and
Pittsburgh with returns of 95.9%, 92.8%, and
75%, respectively, while areas with newer
housing stock, such as Colorado, Arkansas,
Missouri, Texas, Arizona, Tennessee, Florida,
and Nevada, have seen lower returns ranging
between 8.4-10.8%.
Still, iBuyers such as Zillow's "Homes"
have seen significant growth, even if they
are not yet at the level of traditional flippers.
Zillow's "Homes" segment grew from $11
million to over $40 million from Q 3 to Q 4
2018, representing a 400% growth, with
gross profit increasing from $700,000 in Q 3
2018 and $2 million in Q 4 2018, a small but
significant margin, as Zillow admits that the
actual goal is to sell mortgages.
