Home flipping wanes as property buyers find fewer bargains

Home flipping, in which a buyer resells a property quickly for a profit, is on the decline as U.S. residential price gains slow and foreclosures dwindle.

Almost 31,000 single-family houses were flipped in the second quarter, representing 4.6 percent of U.S. home sales, RealtyTrac said in a report Friday. That’s down from 6.2 percent a year earlier and the smallest share since the first three months of 2012, when prices bottomed after the crash, according to the Irvine, California-based data company, which defines a flip as a property sold within 12 months of purchase.

Real estate investors are making smaller profits and finding fewer opportunities for deals after a two-year surge in property values that’s now slowing. The median existing-home price climbed 4.9 percent in July from a year earlier, compared with a 13.1 percent jump in the same month of 2013, the National Association of Realtors said Thursday. Distressed homes accounted for the lowest share of sales since at least 2008.

“The flippers’ formula is to buy a property that they can add value to at a discount and sell at a premium,” Daren Blomquist, vice president at RealtyTrac, said in a telephone interview. “Now, home-price appreciation has slowed dramatically in many of the flipping meccas and the availability of discounted distressed properties has dried up.”

The average gross profit per home flip in the second quarter was $46,000, or 21 percent of the return on the original investment, down from a peak of 31 percent a year earlier, RealtyTrac said.

The metro areas with the most flips were Phoenix, Los Angeles and Miami. Flips in Phoenix and Los Angeles represented a smaller share of transactions compared with a year earlier, while Miami had an increase, according to RealtyTrac. Pittsburgh; New Orleans; Baltimore; Virginia Beach, Virginia; and Daytona Beach, Florida provided the best returns, the company said.

The share of high-end flips is increasing as fewer distressed properties become available. Homes with a sale price of $750,000 or higher represented 4.1 percent of properties quickly sold during the quarter, up from 3.4 percent from a year earlier. Sales of $750,000 to $1 million provided the best return, at an average 41 percent, RealtyTrac said.

bc-flipping

More in Herald Business Journal

With surging Amazon stock, Bezos now worth more than $100B

It’s the first time anyone has crossed the $100 billion threshold since 1999.

Small retailers aim for emotional ties big chains may lack

“Put yourself into the community more and the money will come back to you.”

Even in the Amazon era, Black Friday shows stores are alive

Industry analysts are watching how the nation’s malls fare this holiday shopping season.

Japan’s Mitsubishi Materials reports faked quality data

The company makes components used to make autos, aircraft and electricity generation equipment.

Restaurant owners finding strong appetites in Detroit

The former manufacturing and car-making city is remaking itself into a technology hub.

A look at what some stores have planned for Black Friday

With unemployment low, stores are hoping customers are in a mood to shop.

Boeing bolsters team for potential 797 with leading engineer

Terry Beezhold has been chief project engineer for the 777X program.

Uber paid off their hackers — they’re far from the only ones

“More and more companies have their own Bitcoin wallets for such cases.”

Airline defendants to pay $95 million in 9/11 settlement

The litigation claimed that security lapses led the planes to be hijacked in the Sept. 11 attacks.

Most Read