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Home flipping drops below 5% of 2Q sales


IRVINE, Calif. – Aug. 22, 2014 – RealtyTrac's Q2 2014 U.S. Home Flipping Report finds that home flips – a same-home re-sale in less than 12 months – dropped below 5 percent.

In the second quarter, 4.6 percent of all U.S. single-family home sales were flips, down from 5.9 percent the previous quarter and 6.2 percent year-to-year. Nationwide, nearly 31,000 single-family homes were flipped in the second quarter of 2014.

Florida flips surpassed the national average. Statewide, RealtyTrac found that 6.5 percent of sales were flips, a drop from 8.2 percent the previous quarter. One year earlier, 8.5 percent of home sales were flips.

Nationwide, investors averaged a gross profit of more than $46,000 per flip in the second quarter – a 21 percent gross return on the initial investment. That's down, however from 24 percent in the first quarter and 31 percent year-to-year. The one-year-earlier number, the second quarter of 2013, was flipping's peak since the recession.

In Florida, the average gross profit on a flip was $40,962 in the second quarter, but investors made a higher profit percentage: 29.6 percent.

"Home flipping is settling back into a more historically normal pattern after a flurry of flipping during the recent run-up in home prices in 2012 and 2013," says Daren Blomquist, vice president at RealtyTrac. "Flippers no longer have the luxury of 20 to 30 percent annual price gains to pad their profits. As the market softens, successful flippers will need to focus on finding properties that they can buy at a discount and efficiently add value to."

Other findings

  • Flips completed in 2Q took an average 187 days to complete, up from an average 164 days in the previous quarter and 135 days year-to-year.
  • More high-end homes are being flipped. Homes with a flipped sale price of $750,000 or higher represented 4.10 percent of all homes flipped during the quarter, up 21 percent from a year ago. Homes with a flipped price of $400,000 to $750,000 represented 12.66 percent of all flips, up 10 percent from a year ago. Meanwhile, flips on homes priced below $400,000 declined year-to-year.
  • High-end homes also returned the highest profit: Those with a flipped sale price between $750,000 and $1 million yielded a 41 percent average gross return on investment. Homes in the $50,000 to $100,000 range had the second best return at 37 percent, followed by homes above $1 million at 35 percent.
  • Miami was one of the top three metro areas for flipping and the only one that saw an increase year-to-year. Metro areas with the most flips were Phoenix (1,438 flips), Los Angeles (1,371 flips) and Miami (1,290 flips).
  • Daytona Beach was a top market for flipping profitability. Markets with the best return on flips in the second quarter included Pittsburgh (106 percent), New Orleans (76 percent), Baltimore (73 percent), Virginia Beach, Va. (66 percent) and Daytona Beach, Fla. (63 percent).
  • Metros with the highest dollar amount of average gross profit on home flips included San Jose, Washington, D.C., San Diego, Los Angeles and Seattle, all of which had an average gross profit of more than $100,000 per flip.

© 2014 Florida Realtors®


Related Topics: Buyer services