RealtyTrac has released its Year-End and Q4 2013 Home Flipping Report, which shows 156,862 single family home flips — where a home is purchased and subsequently sold again within six months — in 2013, up 16 percent from 2012 and up 114 percent from 2011.
Homes flipped in 2013 accounted for 4.6 percent of all U.S. single family home sales during the year, up from 4.2 percent in 2012 and up from 2.6 percent in 2011. Flips accounted for 3.8 percent of all sales in the fourth quarter, down slightly from 3.9 percent of all sales in the third quarter and down from 7.1 percent of all sales in the fourth quarter of 2012 — the highest percentage of sales represented by flips in a single quarter since RealtyTrac 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 percent from 2012, while flips on homes with a flipped sale price at or below $400,000 increased 17 percent 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.
“Strong home price appreciation in many markets boosted profits for flippers in 2013 despite a shrinking inventory of lower-priced foreclosure homes to purchase,” said Daren Blomquist, vice president of RealtyTrac. “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.”
Major metro areas with big increases in home flipping in 2013 compared to 2012 included Virginia Beach (up 141 percent), Jacksonville, Fla., (up 92 percent), Baltimore, Md. (up 88 percent), Atlanta (up 79 percent), Richmond, Va., (up 57 percent), Washington, D.C. (up 52 percent) and Detroit (up 51 percent).
Major markets with big decreases in home flipping in 2013 compared to 2012 included Philadelphia (down 43 percent), Phoenix (down 32 percent), Tampa (down 17 percent), Houston (down 17 percent), Denver (down 15 percent), Minneapolis (down 9 percent), and Sacramento (down 5 percent).
“Investors have not lost interest in purchasing and flipping homes. In fact, now that we are seeing home price appreciation they are more interested than ever,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty, covering the Oklahoma City and Tulsa, Okla.,markets. “The challenge for many would-be flippers in our markets is a shortage of available inventory to flip, as evidenced by the decrease in the number of homes flipped in both Tulsa and Oklahoma City in 2013 compared to 2012.”
“New Hampshire home prices did not depreciate as much as other sections of the country, so we never experienced a tremendous amount of distressed inventory, which makes it difficult for people to find inexpensive properties they can flip. So it follows that gross flipping profits have fallen in our market compared to a year ago,” said Steve McGuire, vice president of business development at Berkshire Hathaway HomeServices Verani Realty, covering the Manchester, N.H., market. “When considering whether or not to flip a home it’s also important to note that house flipping is not for the faint of heart, because there are so many variables that could affect the sales transaction, price and profit.”
“The Denver housing market is still experiencing record-low inventory levels, which causes the best potential flip properties to be few and far between,” said Chad Ochsner, owner of RE/MAX Alliance covering the Denver and Boulder, Colo., markets. “We have seen a resurgence of opportunities for fix-and-flips in the Boulder market due to a strong increase in home price appreciation, but the distressed home market has dropped by about half making it a challenge to find the right property.”
“February and March can be a great time to buy a fix and flip home to realize the spike in homes values that usually occurs during the spring and early summer buying season,” he added.