Home flipping looks so fun and easy on TV -- buy a cheap fixer-upper then gut, renovate, and sell it for a huge profit. While the popularity of these TV shows has pushed many new buyers into the market, falling interest rates and an increased demand for properties on the market have also led to an increase in flipping over the last year-and-a-half.
Daren Blomquist, senior vice president at RealtyTrac, expressed some concern that flipping is defined as buying and selling a home within a twelve-month period and might be getting out of hand in some areas.

"While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets," said Blomquist

San Antonio may be one of those frothy markets. A safe buy for a flipper is usually around 25% below market value – this allows them to cover the cost of renovations and fees and still make a profit once the home is sold – but San Antonio flippers are reportedly paying 8% above market value. When these houses hit the market, they will need to sell well above market value to make a profit. Either the flipper will lose money or the buyer will pay too much.

Flips tend to make up a small portion of overall sales in any given area, but they can happen quickly. While a first-time buyer is setting up inspections and shopping around for their home, a flipper will typically close on a cheap house immediately by paying cash. A home flipper may also be a carpenter, plumber, or contractor with the skills and connections to renovate a home much faster than a family hiring out that labor to other people.

Too many flipped homes in one area can drive up prices that leave few options for buyers on a budget, but some flipping is good for the market. House flipping adds value to communities, restoring blighted properties and putting them back on the market. The increase in property values can benefit other homeowners in the neighborhood by increasing the value of their homes as well.

House flipping has been linked to gentrification in some urban communities. In Denver, the city identified 24 census tracts as gentrifying areas and, as Denverite points out, house flipping is prevalent in many of these areas. Heavily flipped neighborhoods in Denver also had significant minority populations from 2010 to 2014.

A study conducted by the Center for NYC Neighborhoods found that flipping activity in Brooklyn and Queens contributed to increased home prices and rents in 2015. A recent report outlined the effects of flipping on Brooklyn real estate:

The median initial purchase price of flips in Brooklyn in 2015 was affordable to families making about $75,000 or 95% of AMI for a family of three. The significantly inflated median resale price was affordable to families making about $125,000 or 163% of AMI for a family of three. That means that while a moderate income family could afford many of these properties before they were purchased by a flipper, the homes are unaffordable by the time they are reintroduced to the market, only months later.

With New York property in high demand, flippers have a huge incentive to buy up affordable homes. Even modest renovations can net big profits. The study recommends anti-speculation taxes, cease-and-desist zoning, and foreclosure prevention services as possible solutions to keep rampant house flipping in check.

Communities with historic value may also have mixed feelings about home flipping. If a flipper is more concerned with turning over a house quickly than preserving its original features, the community's unique character could be at risk. A homogeneity of homes could exist in a highly renovated area, as evidenced by all of the gray houses found in the D.C. area. A speculative buyer who wants to sell a home quickly will update the building to appeal to as many people as possible, which typically means lots of neutral colors and generic features.

Nationally, however, home flipping is not happening at much higher levels than normal, and RealtyTrac reports that most flippers are acting rationally.

"In the first quarter, 71 percent homes flipped were purchased by the home flipper with cash – compared to only 37 percent who purchased with cash at the height of the flipping boom," said Blomquist. "Spending their own money rather than other people's money is keeping flippers conservative."

Unless you're looking in a highly sought-after neighborhood, you probably don't need to worry about local home makeovers driving up your cost of living, but urban neighborhoods may need to take action if they want to keep their homes affordable to all.