RealtyTrac: Flipping Keeps Falling As Gross Profit Per Flip Climbs

About 136,269 U.S. single-family homes were ‘flipped’ in 2014, the lowest level of ‘flipping’ activity since 2011, according to a report from RealtyTrac. That's about 5.4% of all single-family homes sold during the year.

Looking just at the fourth quarter, a total of 32,578 single-family homes, or about 5.3% of all sales, were flipped – an increase of 11% compared to the third quarter, but still down 12% from the fourth quarter of 2013.

Despite the lower percentage of flips, the average gross profit per flip in the fourth quarter increased to $65,993 – or a 37.1% gross return – up from an average gross profit of $65,285 or 36.5% gross return in the third quarter, and up from an average gross profit of $63,017 or 36.4% 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,’ explains Daren Blomquist, vice president at RealtyTrac, in a release. ‘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.’

Metropolitan statistical areas that saw the highest percentage of flips in the fourth quarter were Detroit, Los Angeles, Memphis, Miami, Jacksonville, Florida, Tampa and San Diego.

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