Though we’ve moved past the golden years of flipping that followed the housing market’s collapse in 2007, as the market returns to a stable posture – consistent price increases included – the practice of flipping is regaining some of its former popularity, according to RealtyTrac’s newly released Q3 2015 U.S. Home Flipping Report. From July to September, over 43,000 condos and single-family homes were flipped, or 5 percent of total transactions during the quarter.
Quarter-over-quarter, RealtyTrac reported a 7 percent drop, but examined on a year-over-year basis, the share of total transactions that were flips grew an impressive 18 percent. It is worth noting that in Q3 2014, the share of homes flipped was at its lowest level (4.3 percent) since the first quarter of 2000 – when RealtyTrac first started tracking flipped homes.
As was expected, considering the drop in flipping share, the average gross flipping profit, which is the difference between purchase price and flipped price, was down from last quarter, falling slightly from $62,521 to $62,1222, but again, examining data from the same period last year, RealtyTrac recorded a rise of more than $300.
When considering the price of rehab costs and other expenses occurred prior to flipping the property, otherwise known as the average gross return on investment (ROI), the group found a year-over-year rise of more than a percentage point to 33.8 percent.
Analyzing RealtyTrac’s data by ZIP code, South Florida stands out as a particularly popular spot for home flippers. In Opa Locka, a small city just east of North Miami, the ZIP code of 33056 represented the largest share of flipped homes (30 percent) in the nation. And in fact, four Miami-Dade ZIP codes made it into the top 20 ZIP codes with the highest shares of flipped properties. Together, these Miami ZIP codes – 33056, 33054, 33147, 33168 – average flipping shares of 26.3 percent and an average gross ROI of 64.4 percent – both well above the national averages.
First-time Buyers Buy Flips
According to RealtyTrac Vice President Daren Blomquist, the dip in flipping in 2014 was largely a result of slumping prices and shallow inventories, but the market’s makeup has changed and now investors are interested.
“After curtailing flipping activity last year due to slowing home price appreciation and shrinking inventory of flip-worthy homes, real estate investors have started to jump back on the flipping bandwagon in 2015,” he said.
Blomquist added that, on the acquisitions side, investors are creating new ways to more accurately pinpoint potential flips in the “off-market arena.” Another boost investors are getting is from an influx of FHA buyers, many of whom are first-time homebuyers, who are eager to find an affordable starter home.