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House Flippers Struggle in 2019

February 18, 2019 | By: Betterturnkey | 2

There’s no shortage of enthusiasm for house flipping.

HGTV has a growing number of shows that follow house flippers in California, Nashville, Atlanta, Chicago and Indianapolis.

To compete, CNBC is launching three new shows in May, two with working titles; “Listing Impossible” and “Five-Day Business Flip.” A fourth show is in development.

“Whether it’s investing or building or selling, real estate remains one of the best and fastest ways to build wealth,” said Jim Ackerman, EVP, Primetime Alternative Programming of CNBC, said in a news release.

But in some markets, as the inventory of distressed and run-down properties shrinks, it has become harder for house flippers to find profits.

Home-flipping profits have shrunk to 38 percent from 42 percent over purchase prices, but are actually smaller because the numbers don’t factor in renovation and remodeling costs, which are rising as materials become more expensive, according to Realtor.com.

Still, the overall number of flips grew 3.5 percent over the previous year in September, per Realtor.com.

Places like Las Vegas and Phoenix, which suffered the most when the housing market tanked in the Great Recession, are enjoying a resurgence.

But cities like Columbus, Ohio, Cape Coral, Fla., and Virginia Beach, Va., have seen at least a 10 percent decline because of local market forces that diminish available inventory. In the case of Portland, Oregon, home prices are stabilizing, making it hard to turn a profit.

The housing market also is changing. Sales of existing homes declined 6. 4 percent in December after two consecutive months of increases, according to the National Association of Realtors. Sales are down 10.3 percent from a year ago, partly due to higher interest rates and decreasing inventory, especially in starter homes, chief economist Lawrence Yun said.

The luxury market is a better bet, if flippers can afford it.

Flipping of luxury homes has risen slightly, according to Mansion Global. In 2018, 2.6 percent of homes valued at more than $1 million were flipped, compared to 2.2 percent the year before.

Fourteen of 15 markets surveyed for Mansion Global showed gains. The California markets of Los Angeles, Long Beach and Anaheim reported the most substantial gains in the flipping of luxury homes.

Realtor.com, while reporting mixed numbers on the state of home flipping in 2018, still finds that Millennials are an attractive market for house flippers.

Millennials “want to move into a home that requires minimal work,” Charles Tassell, chief operating officer at National Real Estate Investors Association, told Realtor.com.

Also, real estate data companies such as Zillow are getting into the house flipping game with Zilllow Offers in select markets.

The online real estate company will give sellers a cash offer within a few business days and, once a sale closes, prep the homes for resale after minor renovations.

Seattle-based Zillow Group Inc. (Nasdaq: Z) launched its Zillow Offers platform in Houston Feb. 11, The Houston Business Journal reports.

Houston is the first Texas city for Zillow Offers and the seventh in the country, according to a news release. The other cities are Atlanta, Denver, Las Vegas, Phoenix, and Charlotte and Raleigh, North Carolina. The platform will launch in Dallas by fall 2019.

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