Is House Flipping Making A Comeback?


Chances are, if you’ve watched HGTV or A&E since the mid ’00s, you’ve seen a show or two about houses getting “flipped”.  Maybe it was South Carolina, or Vegas, or Southern California… but anywhere there’s a bustling housing market, you have people “flipping” houses.  

The premise of house-flipping is seemingly simple.  Find an underpriced, run-down house, quickly fix the glaring issues and get it up to code, slap a coat of builder’s beige on everything while filling the kitchen with granite and stainless steel.  Your goal is to sell it at a high price before the value drops or before you get hit with another mortgage payment.  As long as home values kept increasing and banks were making it easy to finance, house flipping made sense.  And in the late 00s, the industry became sort of an indicator of market health.

So it’s no surprise that, when the 2008 financial crisis hit and home prices plummeted and banks tightened up financing, house flipping all but disappeared.  But now, nearly 10 years later, is it starting to come back?

A recent article in the Wall Street Journal (read here) documents the changes that the banking industry is making.  And depending on your outlook, they’re promising (if you’re a house flipper or looking to get into it) or ominously familiar (if 2007-2009 is still resonating with you).  Namely, they are:

– Loans with high loan-to-value, meaning investors need less principle to take on a loan.
– Loose loan requirements.  You have to show bank statements, but not your W2, to get a loan.
– Loans designed to get around postcrisis regulation – loans that aren’t classified as owner-occupied loans and banks funding smaller financers instead of the flippers themselves.

The article tries to temper the excitement/doom by clarifying.  The authors say we’re seeing this kind of activity on a limited basis – predominantly in Southern California where home prices are sky high and inventory is slim.  They also say that, as a whole, banks are only loosening up a relatively small amount of money.  

But they also quote a few folks who believe the “floodgates have opened” and there will soon be easy money for flippers – and presumably homebuyers as a whole – nationwide.  Whether this will be seen as a result of a healthy market or one of the causes of the next downturn, who can say?

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