SOURCE: RealtyTrac

RealtyTrac

October 29, 2015 00:01 ET

Share of U.S. Homes Flipped in Third Quarter Increases 18 Percent From a Year Ago

85 Percent of Local Markets Post Annual Increase in Flipping Activity; Memphis, Fresno, Mobile, Tampa, Daytona Beach, Las Vegas With Highest Flip Share; Best Markets For Flipping to Millennnials, Baby Boomers Identified

IRVINE, CA--(Marketwired - October 29, 2015) - RealtyTrac® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released its Q3 2015 U.S. Home Flipping Report, which shows that 43,197 single family homes and condos were flipped -- sold as part of an arms-length sale for the second time within a 12-month period -- in the third quarter of 2015, 5.0 percent of all single family home and condo sales during the quarter.

The 5.0 percent share in the third quarter was down 7 percent from a 5.4 percent share in the second quarter but up 18 percent from a 4.3 percent share in the third quarter of 2014 -- when the share of U.S. homes flipped hit the lowest quarterly level going back to the first quarter of 2000, the earliest RealtyTrac has data on flipped homes.

"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," said Daren Blomquist, vice president at RealtyTrac. "On the acquisition side, investors are finding creative ways to pinpoint potential flips in the off-market arena, and on the disposition side investors have a bigger pool of potential buyers thanks to a surge in FHA buyers this year, many of them first-time buyers looking for starter homes."

The average gross flipping profit -- the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping experts estimate typically run between 20 percent and 33 percent of the property's after repair value) -- was $62,122 for completed home flips in the third quarter. That was down slightly from an average gross flipping profit of $62,521 in the second quarter but up slightly from an average gross flipping profit of $61,781 in the third quarter of 2014.

The average gross return on investment (ROI) - the average gross profit as a percentage of the average original purchase price -- was 33.8 percent for completed home flips in the third quarter, down from 34.4 percent in the previous quarter but up from 32.7 percent in the third quarter of 2014.

Best counties for flipping to millennials

Using data from the third quarter flipping report and U.S. Census demographic data, RealtyTrac identified 18 counties where the average gross return on a flipped home in the third quarter was at least 30 percent and where the millennial share of the population in 2013 (defined as those between the ages of 20 and 34 in 2013) was at least 25 percent and increased during the housing downturn between 2008 and 2013.

The top five counties for flipping to millennials were Philadelphia County, Pennsylvania, Saint Louis City, Missouri, Baltimore City, Maryland, Cumberland County, North Carolina -- in the Fayetteville area -- and Kings County, New York - Brooklyn. All five of these counties had average gross flipping profits in the third quarter of 63 percent or more.

"With our inventory challenges, especially during the first three quarters, it is a challenge for any investor to find a good flip opportunity in the Denver area," said Heidi Greer, broker at RE/MAX Alliance, covering the Denver market in Colorado. "Most agents who work with investors are helping them find more long term rental property investments, as our current market is much stronger for an investor looking for rental property."

Best markets for flipping to baby boomers

RealtyTrac identified 15 counties where the average gross return on a flipped home in the third quarter was at least 30 percent and where the baby boomer share of the population in 2013 (defined as those between the ages of 49 and 67 in 2013) was at least 25 percent and increased between 2008 and 2013.

The top five counties for flipping to boomers were all in Florida: Charlotte and Hernando counties in southwest Florida, and Volusia, Brevard and Marion counties in central Florida. The only counties outside of Florida on the top 15 list for flipping to boomers were Skagit County, Washington between Seattle and Vancouver; Sussex County, Delaware, on the Atlantic Coast between Washington, D.C. and Philadelphia;and Henderson County, North Carolina in the Asheville metro area.

State, metros and zip codes with highest share of flipped homes

States with highest share of home flipping as a percentage of all single family home and condo sales were Nevada (8.4 percent), Florida (7.9 percent), Alabama (7.5 percent), Arizona (6.9 percent), and Tennessee (6.6 percent).

Among 101 markets with at least 75 single family and condo flips completed in the third quarter, those with highest share of flipping were Memphis (10.5 percent), Fresno (9.5 percent), Mobile, Alabama (9.2 percent), Tampa (9.1 percent) and Deltona-Daytona Beach-Ormond Beach, Florida (9.0 percent).

Other major markets where the share of flipped homes were above the national average in the third quarter included Las Vegas (8.7 percent), Miami (8.6 percent), Jacksonville, Florida (7.6 percent), Baltimore (7.4 percent), Birmingham, Alabama (7.4 percent), Phoenix (7.3 percent), Orlando (7.2 percent), New Orleans (6.9 percent), Virginia Beach (6.8 percent), and Riverside-San Bernardino in Southern California (6.5 percent).

"We are seeing the capitalistic market working well in South Florida with everyone winning," said Mike Pappas, CEO and president of the Keyes Company, covering the South Floridareal estate market. "The flipper is providing updated, improved inventory that is desirable to buyers."

Among zip codes with at least 10 single family home and condo flips completed in the third quarter, those with the highest share of flipping were 33056 in Opa Locka, Florida in the Miami metro area (30.0 percent), 38128 in Memphis (29.5 percent), 63137 in Saint Louis (28.6 percent), 33054 in Opa Locka, Florida (27.8 percent), and 44128 in Cleveland (27.5 percent).

"As equity has continued to rise across the housing stock throughout Ohio, lender confidence has contributed to an increase in funding for flipping of investment properties. While favorable market conditions have led to an increased number of flipped properties throughout the year, increased regulations and government compliance have contributed to added days within the investment property flip cycle, creating added risk and expense, and lessening potential profits for many investors," said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. "The best opportunity for success in flipping properties involves knowledge and experience of the local market conditions, best provided by consulting a realtor early in the housing investment process."

Other zip codes in the top 20 for highest share of flipped homes included zip codes in the Baltimore, Riverside-San Bernardino, Detroit, Tampa, Phoenix, Washington, D.C., and Los Angeles metro areas.

Markets with the highest average returns on flipped homes

States with the highest average gross flipping ROI on completed property flips in the third quarter were Pennsylvania (57.2 percent), Illinois (54.0 percent), Maryland (53.6 percent), Rhode Island (48.1 percent), and Louisiana (47.9 percent). The District of Columbia also posted a high average gross flipping ROI of 55.9 percent in the third quarter

Among 101 markets with at least 75 single family and condo flips in the third quarter, those with the highest average gross flipping ROI were Pittsburgh (78.4 percent), New Orleans (73.1 percent), York, Pennsylvania (64.5 percent), Punta Gorda, Florida (61.3 percent), and Clarksville, Tennessee (59.6 percent).

Among zip codes with at least 10 completed flips in the third quarter with home price data available, those with the highest average gross flipping ROI were 21229 in Baltimore (136.0 percent) and 33063 in Tampa (130.2 percent), along with three Chicago-area zip codes: 60652 in the city of Chicago (120.4 percent), 60402 in the city of Berwyn (120.3 percent), and 60629 in the city of Chicago (115.2 percent).

Report methodology

RealtyTrac analyzed sales deed data and automated valuation data for this report. A single family home or condo flip was any transaction that occurred in the second quarter where a previous sale on the same property had occurred within the last 12 months. Average gross profit was calculated by subtracting the average price for the first sale (purchase) from the average price of the second sale (flip). Average gross return on investment was calculated by dividing the average gross profit by the first sale (purchase) price.

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About RealtyTrac

RealtyTrac is a leading provider of comprehensive U.S. housing and property data, including nationwide parcel-level records for more than 130 million U.S. properties. Detailed data attributes include property characteristics, tax assessor data, sales and mortgage deed records, distressed data, including default, foreclosure and auctions status, and Automated Valuation Models (AVMs). Sourced from RealtyTrac subsidiary Homefacts.com, the company's proprietary national neighborhood-level database includes more than 50 key local and neighborhood level dynamics for residential properties, providing unrivaled pre-diligence capabilities and a parcel risk database for portfolio analysis. RealtyTrac's data is widely viewed as the industry standard and, as such, is relied upon by real estate professionals and service providers, marketers and financial institutions, as well as the Federal Reserve, U.S. Treasury Department, HUD, state housing and banking departments, investment funds and tens of millions of consumers.

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