‘In my grandfather's America, houses weren't for flipping – they were for living in,’ President Barack Obama said in a speech on housing he gave in Phoenix on Aug. 6, 2013.
But with real estate investment trusts, individual investors and even homeowners all too tempted to make a quick buck from rapidly rising home prices, 2013 turned out to be a record year for flipping, according to RealtyTrac's Year-End and Q4 2013 Home Flipping Report.
According to the report, an impressive 156,862 single-family homes were ‘flipped’ last year, up 16% from 2012 and up 114% from 2011. These ‘flips’ accounted for 4.6% of all U.S. single-family home sales during the year, up from 4.2% in 2012 and up from 2.6% in 2011.
‘Strong home price appreciation in many markets boosted profits for flippers in 2013 despite a shrinking inventory of lower-priced foreclosure homes to purchase,’ says Daren Blomquist, vice president of RealtyTrac, in a statement. ‘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. Meanwhile flipped homes were still purchased at an average discount of 13 percent below market value in 2013 – the same average discount as 2012 – indicating that investors are finding discounted buying opportunities outside of the public foreclosure process, particularly in those markets with the biggest increases in flipping for the year.’
Flips accounted for 3.8% of all sales in the fourth quarter, down slightly from 3.9% of all sales in the third quarter and down from 7.1% of all sales in the fourth quarter of 2012, according to the report. RealtyTrac says this is the highest percentage of sales represented by flips in a single quarter since it began tracking flipping data in the first quarter of 2011.
The average gross profit for a home flip – the difference between the flipped price and the price the flipper purchased the property for – was $58,081 for all U.S. homes flipped in 2013, up from an average gross profit of $45,759 in 2012. The average gross profit for homes flipped in the fourth quarter was $62,761, up from $52,746 in the fourth quarter of 2012.
The report also shows the biggest increases in flipping nationwide occurred on homes with a flipped price of $400,000 or more. Although flipping increased across all price ranges, flips on homes with a flipped sale price above $400,000 increased 36% from 2012, while flips on homes with a flipped sale price at or below $400,000 increased 17% from 2012.
The average time to complete a flip nationwide was 84 days in 2013, down from 86 days in 2012 and down from 100 days in 2011.
Metropolitan areas that saw the biggest increases in home flipping in 2013 compared to 2012 included Virginia Beach, Va. (up 141%); Jacksonville, Fla. (up 92%); Baltimore (up 88%); Atlanta (up 79%); Richmond, Va. (up 57%); Washington, D.C. (up 52%); and Detroit (up 51%).
Major markets with big decreases in home flipping in 2013 compared to 2012 included Philadelphia (down 43%); Phoenix (down 32%); Tampa, Fla. (down 17%); Houston (down 17%); Denver (down 15%); Minneapolis (down 9%); and Sacramento, Calif. (down 5%).