By Gino Blefari, President & CEO, Intero Real Estate
Services, Inc.
If house flippers flooding all ranks of the real estate
market eight years ago was the sign of the impending market downturn, then what
does it mean that investors are embracing high-end flipping today?
Reuters this week ran a
story
that looked at a growing trend in the flipping of high-end homes.
"Flipping" is the term we give when someone buys a house at a low
price, usually invests a bit – or a lot – of money in remodeling, then sells
for a nice profit.
Flipping was once a street sport where you'd find just about
anyone regardless of investing or real estate experience partaking in markets
across the U.S. But it faded out pretty quickly when the downturn hit the
housing market.
Even Jeff Lewis, star of Bravo's "
Flipping
Out" has since pivoted to a design services model.
It's back – but in a different form. And it could mean
better things for the market rather than being an ominous sign for rampant
speculation and decline.
This time, what Reuters reports is more flipping with luxury
homes. According to Reuters, the number of flipped homes valued at $1 million
or more has risen nearly 40% nationwide since 2011. It's important to note that
RealtyTrac defines a flip as a home that's been purchased and sold within six
months.
RealtyTrac cites a few specific markets where high-end
flipping is rampant. Luxury house flipping was up 867% in Orlando between 2011
and 2012, and increased 456% in Phoenix. To get a deeper sense of what these
percentages mean, the number of flipped high-end homes in Orlando went from 3
to 29 during this time, from 27 to 150 properties in Phoenix, and from 10 to 73
properties in Las Vegas.
What's driving this activity?
Well, as one source tells Reuters, the opportunity in
flipping at the low end has all but dried up. And despite more risk with more
dollars at the high end, the investments have paid off handsomely for those
investors who know what they're doing.
I like to look at it as another example of why real estate
is never just one story. With so many markets each centering on different local
economies and so many different levels of each of those markets – low to high
end – it's almost impossible to make blanket statements about the state of
housing.
But it's easy to see how the growth in investment at the
high end is a positive overall. If nothing else, the confidence investors must
have going into these high-end deals is a wonderful strength that eventually
will help strengthen overall confidence in the greater housing market.
