This is pushing home prices and rents up, creating an even bigger Housing Bubble and Housing Crisis in 2022. Could a Housing Crash soon follow based on the behavior of these Home Flippers?
Institutional investors such as Blackrock, Opendoor, and Invitation Homes are doing it. Some of them buy a home and sell it at a profit. Others buy a home and rent it out. Either way – the end result is usually higher prices and rental rates for Americans looking to live in the homes.
Real Estate Markets such as Tampa/St. Petersburg and Phoenix have the biggest presence of Home Flippers. The Home Flippers in these markets are leading to record home price appreciation and rental rate growth. And in some cases have increased prices by 100% in a year.
States like California have less home flipping. Los Angeles has the longest homeowner tenure in America at 18 years. Despite this, lawmakers in California are looking to pass a bill that will tax home flippers 25% on their profits.
Housing Markets such as Cape Coral, Las Vegas, Phoenix, Nashville, and Raleigh have way more home flipping than California and would likely benefit more from that law.
However – government regulation into the Housing Market tends to generally not end well. Instead, the best policy tool against home flipping is for the Federal Reserve and Jerome Powell to tighten monetary policy and raise interest rates. This monetary tightening will discourage speculation in the Housing Market and box home flippers out of the market.
The 30-Year Fixed Mortgage Rate is currently 4.5%. If it continues to rise, expect Home Flippers to drop out of the market and begin to lose a lot of money.
Redfin Data on Investor Demand: https://www.redfin.com/news/data-center/new-construction/
LA Times Article on California Flippers: https://www.latimes.com/business/real-estate/story/2022-03-10/assembly-bill-would-tax-housing-speculation-flippers
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