Investors Flipping Fewer Homes: RealtyTrac.
Byline: David Morrison
RealtyTrac, a leading real estate information source, reported flipped homes represented only 4.5% of homes sold in Q2 2015, which represents a full percentage drop from the previous quarter, and almost half the rate it was in Q1 2000, when investors flipped 8% of homes sold.
The Irvine, Calif.-based firm defined flipped homes as those sold for a second time within a 12-month period.
The firm also reported that even though the percentage of flipped homes that sold shrank in Q2 2015, investors made more money on them. Gross profits on the flips -- the difference between the purchase price and the flipped price minus a 20% to 33% renovation investment -- hit almost $71,000 in Q2 2015, up from almost $68,000 in Q1 and $50,000 just one year ago, according to RealtyTrac.
This translated into a gross return on investment of 35.9% for the flips that sold in the second quarter, up only slightly from 35.4% the prior quarter, but up sharply from 23.4% one year ago, the firm reported.
"Despite the rise in flipping returns in the second quarter, home flippers should proceed with caution in the next six to 12 months as home price appreciation slows and a possible interest rate increase could shrink the pool of prospective buyers for fix-and-flip homes," RealtyTrac Vice President Daren Blomquist said. "While average flipping returns are up substantially from a year ago at the national level and in moderately priced markets such as Miami, Atlanta, Phoenix and Minneapolis, flipping returns are softening in some of the higher priced markets such as San Francisco, Seattle, Denver and Los Angeles."
He continued, "The fewer foreclosure deals and longer flipping timelines that we see in the data demonstrate that flippers are getting squeezed on both sides of the profit equation. Experienced flippers will often need to enter into higher risk markets with less solid economic fundamentals to chase better yields. Flipping is not always profitable, as evidenced by the fact that flips on low-end homes priced below $50,000 actually yielded negative returns in the second quarter."