Flipping houses and properties is a practice that is not new, by any means. It probably has been going on since houses have been bought or sold. That does not mean that the house flipping industry (if it can be called that) has always been stable or constant. Trends in the practice fluctuate just as does the real estate market on which it depends.
There are various ways for flipping houses. It can be done as either a "get rich quick" scheme or else as an investment strategy for people unhappy with stock market returns. It also can be employed as a sort of hobby for those who enjoy doing renovation work or want to be their own boss.
Watching the Markets
Trends in the house flipping business generally depend on watching two markets – stocks and real estate. A time-honored maxim of the stock market is that in times of recession or economic downturns, investors should look to diversifying with gold or other commodities with a fixed value. Stock prices might plunge overnight, but the value of certain commodities should remain reasonably stable. In any event, a stock might not rebound, but the price of real estate certainly will, provided it is kept long enough.
For house flippers, that means that their investment will
increase in value when interest rates are lower and borrowers can
more readily get loans. If the stock market is down (and interest
rates area high) a potential house flipper generally will be able
to find properties at a lower cost, provided they can find buyers.
Regardless of the times, many financial advisers will classify house flipping as a high risk endeavor. Making a profit on flipping a house depends on the ability to sell it or else manage the cost of maintaining the property. One newspaper in California estimated that the percentage of houses bought and sold through house flipping in the years 2000-2005 ranged from a low of 1.8 percent to a high of about 5 percent, depending on the economy at the moment.
The trend toward more house flipping was a reaction to the tight real estate market with low interest rates and a high demand among house buyers. The more people there are looking to buy houses, the more profit can be made by those flipping houses as a means of investment.