The home flipping trend continued to slow in the third quarter, as home prices continued to rise, according to RealtyTrac's U.S. Home Flipping Report.
The report shows that 26,947 single-family homes – or about 4% of all single-family home sales – were flipped nationwide in the third quarter. That's down from 4.6% in the second quarter and down from 5.6% in the third quarter of 2013. What's more, it was the lowest level since the second quarter of 2009.
Investors averaged a gross profit of $75,990 per flip in the third quarter – a 36% gross return on the initial investment, not including rehab costs and other expenses, according to the report.
That's up from 35% in the second quarter, but down from 37% a year ago.
"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," says Daren Blomquist, vice president at RealtyTrac, in a statement. "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Blomquist says ‘the most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes.’
‘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,’ he says. ‘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.’
Metro areas with the most flips in the third quarter were Miami (1,190); Los Angeles (1,170); Phoenix (1,147); New York (1,070); and Tampa, Fla. (789). Among these top five, Tampa was the only city to see home flips increase compared to a year ago.
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