Local house flipping below national average

Why have home prices risen so dramatically in many parts of the country?

One of the reasons often cited is flipping — investors buying homes they never intend to live in, sometimes freshening them up, then selling months later for many thousands more than they paid.

Get enough flippers doing this in a particular area, and prices will climb, as has happened in several cities along Florida's coastlines.

However, it's been hard to know exactly where flipping is frequent enough to be a factor — and whether flippers are really on a gravy train to riches.

A new national analysis has begun to answer those questions. It shows that flipping in the Seattle-Tacoma-Bellevue area has increased over the past five years but is still below the national average. The only Washington city that does mirror the national average is Spokane.

The analysis — by HomeSmartReports.com, a California firm that tracks housing data — examines flipping in 147 metropolitan areas across the U.S.

A home is considered flipped if it sells twice within a nine-month period, said Michael Ela, the firm's president.

"The total backdrop for this was to point out that real estate is not a risk-free environment, and one of the best ways to denote this was the concept of property flipping," Ela said.

A low flip rate "suggests a good deal of stability in the marketplace, so the values typically are fairly consistent and it's an easier task to price your home in an accurate value range," he said.

Conversely, a high flip rate indicates that speculators are injecting significant price instability, so prices could soften if local economic conditions sour.

The latest numbers, reflecting transactions that occurred this spring, show that 4.7 percent of national home sales were properties that were flipped. This is down from the previous six months. Sales include houses and condominiums.

Nationally, the median profit those spring transactions realized was $42,500, also down from the six months before. Moreover, 17 percent of flippers lost money when they sold in the spring, the median amount being $38,975.

"Right now flipping is scaling back from where it's been," Ela said. "The biggest sense I have is that people who got in are not as able to get out profitably as they were."

In the Seattle-Tacoma- Bellevue area, some 3.5 percent of spring home sales were flips, Ela said. This is down from 4 to 4.5 percent in the preceding six months but above the five-year average of 2.4 percent.

The average profit Seattle-area flippers made in the spring was $42,575, mirroring the national average. However, some 8 percent lost money, an average $15,750.

No data is available to explain why some transactions made money and others didn't.

The Las Vegas area leads the nation in flips, with 8.9 percent of spring home sales being investor driven. Other areas where flipping accounts for at least 7 percent of recent sales include the Palm Coast and Fort Myers areas of Florida and the Phoenix area.

Yakima is tied with Omaha and Lincoln, Neb., for the nation's lowest flip rate over the last five years: 1.7 percent.

Ela said he hopes this information will help buyers and sellers understand their local market better.

"Consumers have been conditioned over the last three or four decades to look at comps and comps only," he said, referring to sales prices of similar properties. "What we're saying is wait a minute. Look at these other things. Look at flipping."

Elizabeth Rhodes: erhodes@seattletimes.com