RealtyTrac: House Flipping Down 3.7% In Q1 As Prices Continue To Rise

Posted by Patrick Barnard on May 01, 2014 No Comments
Categories : Residential Mortgage

Rising home prices are taking some steam out of the flipping trend.

According to RealtyTrac's Home Flipping Report, 3.7% of all U.S. single-family home sales in the first quarter were flips, down from 4.1% in the fourth quarter of 2013 and down from 6.5% in the first quarter of 2013.

RealtyTrac defines a ‘flip’ as a home that is purchased and subsequently sold again within six months.

In general, most of the flipping is occurring among lower-priced properties. The average return on investment for single-family homes flipped in the first quarter was $55,574.

On average, flippers are earning an unadjusted return on investment of 30% on each flip – up slightly from a year ago when the average was around 28%. The ROI on each flip, however, is typically contingent on how much the ‘flipper’ invested in the property prior to selling it and, more specifically, what improvements were made.

‘Slowing home price appreciation early this year in many of the most popular flipping markets put some investors in danger of flying too close to the sun,’ says Daren Blomquist, vice president at RealtyTrac, in a statement. ‘But investors appear to have recalibrated their flipping strategy, accounting for the slower home price appreciation even if that means fewer flips. This is another good sign that this housing recovery is behaving much more rationally than the last housing boom, which was built largely on unfounded speculation rather than fact-based calculations.’

Flips completed in the first quarter took an average of 101 days to complete, up from an average of 92 days in the previous quarter and up from an average of 79 days for flips completed in the first quarter of 2013.

States with the highest share of flips in the first quarter included New York (10.2%), Jacksonville, Fla., (10.0%), San Diego (7.1%), Las Vegas (6.7%) and Miami (5.9%).

Cities with the highest share of flips included Pittsburgh (89%), Philadelphia (56%), Memphis (51%), Detroit (48%) and Seattle (48%).

Cities that saw the biggest year over year increase in home flipping as a share of all sales included San Antonio (up 52%), Nashville (up 50%), Indianapolis (up 47%), Austin (up 35%), Providence, R.I. (up 33%) and Oklahoma City (up 33%).

Other major markets with year-over-year increases in flipping as a share of all sales included Los Angeles (up 1%), Dallas (up 28%), Seattle (up 19%), Houston (up 29%), and Portland (up 2%).

Cities that saw the biggest decrease in home flipping included New Orleans (down 83%), Baltimore (down 81%), Minneapolis (down 80%), Richmond, Va. (down 80%), Detroit (down 76%) and Washington, D.C. (down 73%).

According to the report, 82% of all properties flipped in the first quarter were sold to owner-occupants; 18% to buyers with a different mailing address than the property.

In addition, 43% of all properties flipped in the first quarter were all-cash sales to the new buyer.

What's more, 58% of all properties flipped in the first quarter were three-bedroom homes, 21% were four-bedroom homes and 17% were two-bedroom homes.

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