I believe there will always be a market for home flippers – where an investor purchases a home, makes improvements and then resales the property—hopefully for a profit. Some people simply do not have the vision to take a current home “as is” and see the potential in changes – some cosmetic and some structural, but they do like the end results. Others, while the having the before and after perspective, are more than willing to let someone else take the risk, investment and effort to update and improve the property.
Each quarter RealtyTrac reports a summary of homes that are purchased and resold within six months. The third quarter of 2013 saw almost 33,000 flips nationwide, while down 35 percent sequentially from the second quarter of 2013, was up 13 percent year-over-year.
A unique twist this past quarter was the growth in flips among higher-priced properties. In a year-over-year comparison, the number of flips declined in all price ranges of $400,000 and less. Flips in homes priced from $2 to $5 million increased by almost 350 percent and was up in all price ranges starting at $750,000.
RealtyTrac first reduced the list of markets to those having at least 100 flips in the third quarter of 2013. They required each included market to also have posted a year-over-year increase in the number of flips. The following table lists the top 10 markets passing these two criterion, ranked by the greatest profitability. To gauge the investor’s actual returns, improvement, holding and transaction costs need to be deducted from the average gross profit.
Rising home prices have reduced the profit potential and hence the number of flips in many markets. On a Q3 2013 to Q3 2012 comparison, flips are down 37 percent in Phoenix, 47 percent in Tampa, 28 percent in Orlando and 37 percent in Stockton, California.
To read the entire RealtyTrac report containing added information and five more markets click http://www.realtytrac.com/content/foreclosure-market-report/q3-2013-home-flipping-report-from-realtytrac-7907. Included in the RealtyTrac report is a link to custom order (at a cost) specific-market reports with a range of data down to the neighborhood level.
As distressed real estate shrinks in volume and home prices rise, the ability to profitably flip retreats.
Housing in many markets continues to improve, and that is good news.