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Saturday, September 30, 2006

Seattle Light On 'Flipping'

An oft-cited argument by those who believe prices in Seattle are totally justified is that the number of "investors" here is not at the level of other, more obviously bubbly cities. However, no one ever seems to be able to provide any actual statistics to back up this assertion. While it does not actually answer the question of "how many local purchases are by investors" a new study at least provides a little insight into the investment situation in Seattle.

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.
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, 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 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.
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.
I don't doubt that many anti-bubble types will latch on to this story as "proof" that Seattle real estate prices are justified, and not propped up by investors. However, I don't think that this study should offer much comfort to those with that viewpoint. Seattle's rate of flipping is only slightly below the national numbers, and as recently as late last year was right up there with the rest of the nation.

Also, remember that the oft-repeated argument is that Seattle doesn't have as many investors as other cities. Since the study was limited to 9-month flipping, it really doesn't provide a complete picture of amount of investment that's going on in our area. Even our local blogging real estate investor Eric has rarely (if at all) closed a deal in nine months or less.

Does Seattle have less flipping than other bubble cities? Yes, slightly. Does Seattle have less investment purchases than other bubble cities? Who knows?

(Elizabeth Rhodes, Seattle Times, 09.30.2006)


Towelie McTowel said...

These numbers also don't count all the condo 'investors' in Ballard and downtown that plan to sell when the project completes. When I looked at The Greenlake a few years ago, they touted the number of 'investors' that had interest in the building. I'm guessing, like in other cities, there are many 'investors' in these condo developments.

aetakeo said...

I've watched that car-crash in slow motion show, "flip this house"; and the flippers sometimes live in the house for a year? Or even two? In order to avoid taxes. Just saw a guy in San Diego doing that. He'd been flipping over a slower interval - 2 year flips - but with higher ticket properties and more extensive renos; and, of course, riding the wave up. So I don't know if the 9 month thing is hard and fast.
Plus, the investment side often is made up of non-flippers. I know some of those folks. They're not having a lot of fun right now.