U.S. HOME FLIPPING DROPS BELOW 5 PERCENT OF ALL SALES IN SECOND QUARTER, TO 2-YEAR LOW

Metro Areas with
the Most Flips Include Phoenix, Los Angeles and
Miami;

Investors Realized Average
Gross Profit of $46,000 per Flip, a 21 Percent
Return;

IRVINE, Calif. – August 22,
2014 —
RealtyTrac® (www.realtytrac.com), the
nation’s leading source for comprehensive housing data, today released its Q2
2014 U.S. Home Flipping Report, which shows that nearly 31,000 single family
homes were flipped nationwide in the second quarter of 2014 — where a home is
purchased and subsequently sold again within 12 months — representing 4.6
percent of all U.S. single family home sales, down from 5.9 in the first
quarter of 2014 and down from 6.2 percent in the second quarter of
2013.

 

Investors
averaged a gross profit of more than $46,000 per flip on homes flipped in the
second quarter of 2014, a 21 percent gross return on the initial investment.
The average gross return was down from 24 percent in the first quarter and down
from 31 percent a year ago, which was the peak in percentage return on flips
nationwide since RealtyTrac began tracking the flipping data in the first
quarter of 2011.

“Home flipping is settling back into a more
historically normal pattern after a flurry of flipping during the recent run-up
in home prices in 2012 and 2013,” said Daren Blomquist, vice president at
RealtyTrac. “Flippers no longer have the luxury of 20 to 30 percent annual
price gains to pad their profits. As the market softens, successful flippers
will need to focus on finding properties that they can buy at a discount and
efficiently add value to.”

Other high-level
findings in the report:

  • Flips
    completed in the second quarter took an average of 187 days to complete, up
    from an average of 164 days in the previous quarter and up from an average of
    135 days for flips completed in the second quarter of
    2013.
  • High-end homes represented an
    increasing share of homes flipped in the second quarter. Homes with a flipped
    sale price of $750,000 or higher represented 4.10 percent of all homes flipped
    during the quarter, up 21 percent from a year ago, while homes with a flipped
    price of $400,000 to $750,000 represented 12.66 percent of all flips, up 10
    percent from a year ago. Flips on homes priced below $400,000 declined as a
    share of all flips from a year ago.
  • The best returns on homes flipped in the second quarter were on homes with a
    flipped sale price between $750,000 and $1 million, yielding a 41 percent
    average gross return on investment. Homes in the $50,000 to $100,000 range had
    the second best return at 37 percent, followed by homes above $1 million at 35
    percent.
  • Metro areas with
    the most flips were Phoenix (1,438 flips), Los Angeles (1,371 flips) and Miami
    (1,290 flips). However, all three metro areas saw declines in flipping activity
    as a share of total home sales from the previous quarter, and Miami was the
    only one of the three metro areas to see its home flipping share increase from
    a year ago.
  • Markets with the best
    return on flips in the second quarter included Pittsburgh (106 percent), New
    Orleans (76 percent), Baltimore (73 percent), Virginia Beach, Va. (66 percent)
    and Daytona Beach, Fla. (63 percent).
  • Metros with the highest dollar
    amount of average gross profit on home flips included San Jose, Washington,
    D.C., San Diego, Los Angeles, and Seattle, all of which had an average gross
    profit of more than $100,000 per flip.

Flippers face low
inventory and rising prices in Seattle, Southern
California

“We are seeing a lot of interest in the
speculative market by investors looking to capitalize on rising home prices in
Seattle, but the challenge they’re running into is inventory. We currently have
about one month of inventory in Seattle, so competition for homes is fierce,
and many homes are selling for well above asking price,” said OB Jacobi,
president of Windermere
Real Estate
, covering the Seattle
market
.  “This means investors looking to flip a home
and make a healthy profit must think outside the box. Gone are the days of
lipstick-on-a-pig flips — today’s flips must be total remodels from the studs
out with high-end finishes, built-out basements and additional square
footage.  Those are the homes that are bringing the most return on
investors’ dollars in Seattle.”

“Our market has seen a large
amount of property flipping over the last three years as investors made up a
large segment of our market with a lot of international money flowing in as
well. The properties have seen large appreciation in average and median sales
prices so the investors have had a good return on their money and risk taken,”
said Steve Rodgers, CEO/president & owner of Real
Living Lifestyles
, covering the San Diego
market
.  “We are seeing some of the investor market
slow down due to an increase in inventory and prices pushing some flippers out
of the market, but real estate still remains a great investment no matter who
is jumping in!”

“Opportunities for investors to flip homes is
still very much alive and well in Southern California as inventory is starting
to expand,” said Chris Pollinger, senior vice president of sales at First
Team Real Estate
, covering Orange, Riverside and San Bernardino
countiesin
the Southern California
market
.

Phoenix and Los
Angeles flippers espouse extensive rehab on flips

Maria
Giordano, a former nurse-turned-flipper who has flipped more than 20 houses in
the Phoenix market over the past two years, takes a rehab-heavy approach when
flipping a house.

“I am one of those flippers who is not just
replacing paint and carpet,” she said, adding that her typical flip is a home
that is 40 to 50 years old but that she also does extensive rehab on newer
homes. “Even if it’s a house that was built in the 1990s, I’m gutting the
master bath, usually the hallway bath, taking out walls, really changing the
floor plan … so really you’re giving someone the look of a brand new house in
an older neighborhood.”

Jennifer Laske, who has been flipping
homes in the Compton and Inglewood areas of Los Angeles for the past two years
with her husband, said she takes a similar approach.

“Putting
lipstick on the problem isn’t going to end us up with a beautiful house,” she
said of a recent flip that required ripping out walls and shoring up the
foundation. “The floor plan layouts that we’ve changed, everything that we’ve
done here is to maximize the dollar amount when this house sells, and also make
somebody really love this house. So we’re not trying to put some paint here and
trick anyone, we’re actually trying to make a really beautiful
house.”

Report
methodology

RealtyTrac analyzed sales deed data and
automated valuation data for this report. A single family home flip was any
transaction that occurred in the second quarter where a previous sale on the
same property had occurred within the last 12 months.

Special note on methodology change in second
quarter of 2014:
RealtyTrac adjusted its methodology for flipping to
include properties bought and subsequently resold within 12 months vs. six
months in previous reports. This methodology was applied retroactively to
previous quarters as well for
comparison. 

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Media
Contacts:

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949.502.8300949.502.8300949.502.8300949.502.8300,
ext. 139
jennifer.vonpohlmann@realtytrac.com

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Walker
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ext. 268
Ginny.walker@realtytrac.com

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