Negative Effects Of Flipping A House

Flipping is a term, used primarily in the United States, which refers to the practice of buying an asset and quickly reselling ("flipping") it for profit.

Although the practice of flipping existed long before the real estate bubble, it became more rampant and widespread. Flipping was so popular nationally that some DIY television programs detailed the process.

Flipping can play a role in the gentrification of older communities. As flipping occurs more and more in a community, the total cost of living there can rise substantially, essentially forcing the local people, specifically the younger generations, to relocate.

During the real estate bubble, flipping was linked to the mass migration of Californians to the less expensive areas of the surrounding states such as Arizona, Nevada, Texas, Oregon and Washington. Areas such as Phoenix, AZ and Las Vegas, NV which were once very inexpensive to live in prior to the real estate bubble are now quite expensive. The chain reaction continues, as the people of these cities had to find somewhere cheaper to live to maintain their standard of living.

The other significant adverse financial aspect of the mentality of "flipping" is when interest rates increase. The resulting lack of sales, and major price depreciations, often far below, their previous increases, results in a flood of properties on the market at one time, not selling due to lack of buyers, causing a meltdown of a local market and potentially the economy as a whole.