Now just imagine that you are a homedebtor... you have recently spent 700K on a crappy walk-up condo... you have a 80/20 mortgage with an "interest only" feature... recent comps indicate that it is "worth" 5% less than your purchase price... inventory appears to be piling up... what is going through your mind right now?

HARM,

While flippers do have a disproportionate affect on the market, they are a small percentage of the buyers and owners. There are a ton of legitimate buyers of second homes, and there are enough buyers of rental properties to enable 30% of the population to rent from these landlords. Most are not flippers. Flippers buy and then sell inside a matter of months – often without even getting a tenant. In addition, just consider the math – if the average duration of ownership for a home is seven years, then flippers could only be a tiny percentage of the total. Try the math…

Assume that the world were half flippers and half long-term owners, and all the long-term owners held for 20 years while the flippers continuously bought and held for three months. During a 20 year period the long-term owners would each have owned one home, while the flippers would have each owned (and sold) 80 homes for a total of 81 homes owned. The average duration of ownership would be just under six months (40 years of ownership divided by 81 homes owned). However, the average duration is about seven years.

So you see it is mathematically impossible for the number of flippers to be anything close to half of the market for any length of time. In fact, the math only works using a tiny percentage on a long-term basis, or as is really the case, a modest percentage on a short-term basis.

Soon the flippers will all be gone. Some rich and some flat broke. They (or a new crop) will reappear when the market nears its next cycle peak many years from now. I have been through four real estate cycles during my adult life. The flippers have been there for every peak, doing essentially the same things each cycle.