House flipping is making a comebackDate posted: 4/22/14 11:15:00 AM
Flipping homes isn't the major market for profits that it was once prior to the downturn of the housing sector, but that doesn't mean savvy do-it-yourselfers and residential investors can't make bank in the sector.
According to HousingWire, home flipping profits are up 30 percent in the first quarter of 2014 compared to last year, though less than four percent of all homes sold comes from such sales.
"Slowing home price appreciation early this year in many of the most popular flipping markets put some investors in danger of flying too close to the sun," said Daren Blomquist, vice president at RealtyTrac. "But investors appear to have recalibrated their flipping strategy, accounting for the slower home price appreciation even if that means fewer flips."
The top 14 markets are especially producing profits for those buying, upgrading and making quick sales of homes. HousingWire reported that the top five flipping markets - Prince George's County, Maryland; York County, Pennsylvania; Baltimore County, Maryland; Campbell County, Kentucky; and New Castle County, Delaware - notched between 52 percent and 83 percent return on investments.
Prince George's County produced the best numbers. From April 2013 to March 2014, the county flipped 347 homes for an average gross return on investment of 83 percent. Flipped homes in George's County were purchased for an average of approximately $125,000 and sold for more than $229,000.
Baltimore had one of the highest rates for flips for a top 15 market with 546 completed during that 12-month span. Homes in Baltimore were purchased for around $131,000 and sold for $224,000 for an average return on investment of 70.8 percent.
The typically home flip
The standard sales price of single-family homes flipped in the first quarter of 2014 was $55,574 more than the average original purchase price, which is an increase from a year prior when the average gross profit recorded by a flip was $51,805.
"This is another good sign that this housing recovery is behaving much more rationally than the last housing boom, which was built largely on unfounded speculation rather than fact-based calculations," Blomquist said.
The New York-New Jersey metro area posted the most flips in the 12-month span ending March 2014 with 7,066 flips. The Phoenix metro area was second with 4,632 flips, which is quite a number considering the Phoenix metro area has a population of 4.4 million compared to New York's approximate 20 million residents, according to the Phoenix Business Journal.
Phoenix-area flippers notched an average return on investments of 31.42 percent per flip. Their average purchase price was $172,547 and their average sales price was $226,761. Housing flippers in the Phoenix metro area contributed to seven percent of all the single family purchases in the area, up six percent from a year ago.
"Strong home price appreciation in many markets boosted profits for flippers in 2013, despite a shrinking inventory of lower-priced foreclosure homes," Blomquist said.
Blomquist said that investors and housing flippers are locating discounted buying opportunities outside of the traditional public foreclosure process.
By the numbers
In 2013, flipped homes made up 4.6 percent of all the nation's single family home sales, an increase of 0.4 percent from 2012. In 2011, that total sales attributed to housing flips was just 2.6 percent. While non-distressed properties in ripe areas are hot with housing flippers, the market is still being propelled by foreclosures.
"For the year, 21 percent of all properties flipped were purchased out of foreclosure, but that is down from 27 percent in 2012 and 32 percent in 2011," Blomquist said.
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