Flipping has flopped to its lowest level since the second quarter of 2009, accounting for only 4 percent of all sales in the third quarter.
Only 26,947 single family homes were flipped nationwide in the third quarter of 2014 representing 4 percent of all U.S. single family home sales, down from 4.6 percent in the second quarter of 2014 and down from 5.6 percent in the third quarter of 2013. Flipping, defined as purchasing a home is purchased and subsequently selling it again within 12 months –has reached its lowest level in four years.
However, investors’ profit margins soared this year. Investors averaged a gross profit of $75,990 per flip on homes flipped in the third quarter of 2014, a 36 percent gross return on the initial investment — not including 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, according to RealtyTrac.
“Flipping returned to its historic norm of 4 percent in the third quarter as home price appreciation cooled in many of the hot flipping markets across the country,” said Daren Blomquist, vice president at RealtyTrac. “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. The most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes.
“The markets with an increase in flipping tend to be those with older, distressed, inventory still available that flippers can often buy at a discount and add value to,” Blomquist continued. “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.”
Other high-level findings in the report:
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.