Don’t tell the HGTV producers who find audiences for their endless stream of shows devoted to house flipping, but it’s looking like flipping is losing popularity.
RealtyTrac® reports that last year flips fell to their lowest market share since 2011. Some 136,269 U.S. single family homes were flipped in 2014, 5.4 percent of all single family home sales during the year.
A total of 32,578 U.S. single family homes were flipped in the fourth quarter, representing 5.3 percent of all single family home sales during the quarter. The 5.3 percent share of flips in the fourth quarter was up 11 percent from the previous quarter but still down 12 percent from a year ago.
Flips are dwindling despite improving returns. The average gross profit — the difference between the purchase price and flipped price — for completed flips of single family homes in the fourth quarter was $65,993, representing a 37.1 percent gross return. That was up from an average gross profit of $65,285 representing a 36.5 percent gross return in the third quarter, and an average gross profit of $63,017 representing a 36.4 percent gross return in the fourth quarter of 2013.
“Investors have picked much of the low-hanging fruit when it comes to home flipping over the past three years since home prices bottomed out in the first quarter of 2012,” said Daren Blomquist, vice president at RealtyTrac. “As home price appreciation slows to single digits in most markets, flippers need to be more selective and creative about the properties and neighborhoods they target.
“In many cases the best neighborhoods for profitable flipping in a slower-appreciating market are those that come with a higher risk because of location and condition of properties, but also have a bigger upside if investors are able to correctly predict the path of progress in the region,” Blomquist added. “It appears that most investors completing flips in the fourth quarter were able to do just that. Even though the share of flips was down from a year ago during the quarter, the average gross return per flip increased.”
Zips with highest share of Q4 flips in Detroit, Los Angeles, Memphis, Miami
Among zip codes with at least 10 single family home flips completed in the fourth quarter of 2014, there were 10 where flips represented 25 percent or more of all single family home sales during the quarter. Metropolitan statistical areas with top 10 zip codes for share of flips in the fourth quarter were Detroit, Los Angeles, Memphis, Miami, Jacksonville, Florida, Tampa and San Diego.