RealtyTrac: Home flipping at lowest level since ‘09

IRVINE, Calif. – Nov. 20, 2014 – RealtyTrac's Q3 2014 U.S. Home Flipping Report, finds 26,947 single-family U.S. homes flipped (bought and resold within 12 months) in the third quarter – 4.0 percent of all single-family sales.

That's a drop from the second quarter when 4.6 percent of single-family sales were flips, and down from 5.6 percent year-to-year. It's the lowest level of flipped homes since the second quarter of 2009.

The current level of home flips has now reached its "historic norm," says Daren Blomquist, vice president at RealtyTrac. He says it's due to a drop in home price appreciation in many markets where flipping has been hot.

"Meanwhile, the record-high average profits per flip in the quarter demonstrate that flippers are still filling an important niche in an aging housing market with historically low levels of new homes being built," Blomquist says. "The most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes.

Overall, investors averaged a gross profit of $75,990 per flip in the third quarter – a 36 percent gross return on initial investment – though that number doesn't include rehab costs and other expenses. The average gross return was up from 35 percent in the second quarter but down from 37 percent a year ago.

Blomquist says markets that have seen a flipping increase tend to have older, distressed inventory that can be upgraded. "Those discounted distressed properties have become harder to find, but a recent jump in scheduled foreclosure auctions could provide more fodder for flippers in the next three to six months."

"Investors have had a heyday in South Florida over the past five years. These third quarter numbers show that good opportunities still exist for those in tune to the market," said Mike Pappas, CEO and President of the Keyes Company representing Southern Florida.

Other findings

Metro areas with the most flips in the third quarter were Miami (1,190 flips), Los Angeles (1,170 flips), Phoenix (1,147 flips), New York (1,070 flips) and Tampa (789 flips). Among these top five, Tampa was the only to post an increase in the share of home flips compared to a year ago.

Markets with the best return on flips in the third quarter included Baltimore (88 percent), Pittsburgh (79 percent), Detroit (61 percent), Richmond, Va. (60 percent) and Mobile, Ala. (59 percent).

Flips completed in the third quarter took an average 185 days to complete, down slightly from 187 days in the previous quarter, but up from an average 133 days for flips a year earlier.

Homes priced below $100,000 represented 20 percent of all homes flipped during the quarter, up from 19 percent in the second quarter and 18 percent one year earlier.

Homes priced $100,000 to $400,000 represented 64 percent of all homes flipped during the quarter, down from 65 percent a year ago

Homes with a flipped price of $400,000 to $750,000 represented 12 percent of all flips, down from 13 percent a year ago.

Flips on homes priced above $750,000 accounted for nearly 4 percent of all flips in the third quarter, down slightly from a year ago.

The best returns on homes flipped in the third quarter were on homes with a flipped sale price between $1 million and $2 million, yielding a 45 percent average gross return on investment. Homes in the $100,000 to $200,000 price range had the second best return at 43 percent, followed by homes in the $200,000 to $300,000 price range with an average gross return of 41 percent.