With rising home prices, increasing interest rates, tighter credit and, in many areas, a serious lack of available inventory, one would think there would be a decrease in opportunities for investors to ‘flip’ homes for profit.
That was not the case for the first half of this year. RealtyTrac's Midyear 2013 Home Flipping Report shows that there was a 19% increase in single-family property flips during the first half, compared to the first half of 2012.
According to the report, there were 136,184 single-family home flips – up 19% year-over-year and up 74% from the first half of 2011. Helping to drive the increase was the high number of foreclosed and real-estate-owned properties on the market, many of which were auctioned to investors at below-market-value prices.
RealtyTrac defines a ‘flip’ as when a home is purchased and sold again within a six-month period. The report lists the top 15 markets for property flipping based on the increase in the number of flips compared to a year ago, as well as the average percent return.
According to the report, real estate investors made an average gross profit of $18,391 on single-family home flips in the first half, a 9% gross return on the initial purchase price. That was up 246% from an average gross return of $5,321 in the first half of 2012 – and from an average loss of $13,206 in the first half of 2011.
On average, investors purchased the homes that they flipped for 5% below market value and then sold those homes for 1% above market value.
The average number of flips nationwide is now on the decline, however, due to the aforementioned market factors.
"While flipping continues to be profitable in most markets, particularly those where the home price recovery is still nascent and a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount, home flipping is tapering off in markets where fewer of those distressed bargains are available," said Daren Blomquist, vice president at RealtyTrac, in a release. "Out of the 100 markets we analyzed for the report, 32 had declining flipping numbers, including perennial flipping hot spots like Las Vegas, Phoenix, Southern California and Atlanta. Still, flipping was on the rise in more than two-thirds of the markets, including New York, Washington, D.C., Chicago and several Florida metros."
For more, click here.