Home flipping sales declined nationwide both quarter-over-quarter and year-over-year, hitting their lowest level since the second quarter of 2009, according to RealtyTrac's Q3 2014 U.S. Home Flipping Report released today.
The number of home flipping sales, or those in which a home is purchased and sold within 12 months, represented 4 percent of all single-family home sales in the U.S. in the third quarter, down from 4.6 percent from Q2 2014 and from 5.6 percent in the third quarter of 2013, according to RealtyTrac.
The average gross return on investment for flipped homes in Q3 was 36 percent, a slight increase from 35 percent in Q2 but a slight decline from 37 percent from the same quarter last year, according to RealtyTrac. The average gross profit per home flipped for investors was $75,990 in the third quarter, RealtyTrac reported.
"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," said Daren Blomquist, VP of RealtyTrac. "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. The most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes."
The top five metropolitan areas with the most home flips were Miami (1,190), Phoenix (1,147), New York (1,070), and Tampa (789) with Tampa being the only one of those five that saw a year-over-year increase in home flips in Q3, according to RealtyTrac. The top five metros that saw the highest year-over-year increase in home flips were Louisville, Kentucky (117 percent), Kansas City (66 percent), Boston (40 percent), New Orleans (38 percent), and Indianapolis (35 percent).
Metro areas with the highest return on investment for home flips in Q3 were Baltimore (88 percent), Pittsburgh (79 percent), Detroit (61 percent), Richmond, Virginia (60 percent, and Mobile, Alabama (59 percent), according to RealtyTrac. San Francisco, San Jose, Los Angeles, New York, Seattle, and San Diego posted the highest average gross profit among metros per home flip, all with more than $125,000 per home flip.
"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," Blomquist said. "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."
The national average amount of time it took to complete a home flip in the third quarter was 185 days, a slight decrease from 187 days in Q2 but an increase from 133 days from the third quarter of 2013, RealtyTrac reported.