Flipping Houses Flopping Markets

Asset prices during the pandemic have seen quite a bit of volatility. The housing market has seen an inversion, where semi-detached and detached houses have been rising in price, but the condominium is stagnant. As the work from home phenomenon radically changes the way in which we operate, the demand for more space rises, and the need for smaller downtown condos deflate. The issue here isn't really the need for space but more so the effect of 'flipping houses' on the real estate market. 

Primarily we define the word 'flipping'. The act of flipping a house is the purchase, renovation, and selling of a now more 'fancier' house. In a nutshell, the value of a house is determined by land, location, number of bedrooms/bathrooms, furnishings, and appliances. Moreover, other determinants such as type of construction, age, and other amenities do play a role. Flipping of a house would involve upgrading of one or more of these determinants. 

The Bank of Canada, however, attributes the rise in prices to FOMO (Fear Of Missing Out) amongst other determinants. During the pandemic, savings have risen allowing individuals or families opting to splurge on rather larger and more modern homes. Subscribers of the flipping house model are quite pleased with such an environment as much higher profits are realized than pre-pandemic markets. Higher demand also yields better quality in houses, and people are willing to pay a lot more for higher end houses. 

It is worth mentioning that there is a lack of data. On one hand, we can account the rise in prices to FOMO, and as the article quite aptly puts it, "excessive exuberance". On the other hand, for places that do not have sufficient data collection, we cannot make the same conclusion about them. In fact places like King, ON and Innsifil, ON have seen soaring prices, almost reaching the million dollar mark. 

The concept of FOMO is somewhat enshrined in human DNA, and a strong determinant for consumer sentiment within economies. Now it's important to note that FOMO in this case is not a bad thing, yet it does beg to ponder if the prices are being artificially inflated due to FOMO, or do people really want bigger spaces. And if FOMO is the primary cause, then what happens when people move back into downtown condominiums. BoC doesn't really have enough tools up their sleeve other than making lending requirement more strict, considering how strict they already are. And there are always 3rd party lenders too. I believe there is a market correction looming ahead, housing prices will fall as the world begins to recover. Metropolises will continue to be metropolises. 

Financial Post: Bank of Canada sees 'a lot more flipping' in housing market.

https://financialpost.com/real-estate/bank-of-canada-sees-more-investor-activity-flipping-in-housing-deputy-governor