Nationwide sales of flipped homes dropped both quarter-over-quarter and year-over year in the second quarter of 2014, according to the Q2 2014 U.S. Home Flipping Report released by RealtyTrac on August 22.
About 31,000 homes were flipped (bought and sold again within 12 months) in Q2, accounting for 4.6 percent of all single family home sales in the U.S, according to RealtyTrac. This number represents a 22 percent decline from Q1 2014 (5.9 percent) and a 26 percent decrease from Q2 2013 (6.2 percent).
RealtyTrac also reported that gross profits on flipped homes were down for Q2 2014 after peaking in Q2 2013. Investors made an average of 21 percent gross return on initial investment (about $46,000 per flip), a drop from 24 percent in Q1 and from their peak of 31 percent in Q2 2013. RealtyTrac began tracking home flipping data in 2011.
"Home flipping is settling back into a more historically normal pattern after a flurry of flipping during the recent run-up in home prices in 2012 and 2013," said Daren Blomquist, vice president at RealtyTrac. "Flippers no longer have the luxury of 20 to 30 percent annual price gains to pad their profits. As the market softens, successful flippers will need to focus on finding properties that they can buy at a discount and efficiently add value to."
Highlights from RealtyTrac's report include:
- Homes that sold for between $750,000 and $1 million accounted for the largest average gross return on investment, at 41 percent. Homes priced between $50,000 and $100,000 had the second largest return on investment (37 percent). Homes priced at more than $1 million were third at 35 percent.
- Homes priced more than $750,000 accounted for 4.1 percent of all flips, a number that has increased by 21 percent from Q2 2013. Homes in the $400,000 to $750,000 range also increased by 10 percent from last year, up to 12.66 percent for Q2.
- The top three metro markets as far as total number of flips in Q2 were Phoenix (1,438), Los Angeles (1,371) and Miami (1,290). The markets with the highest return on investment on home flips were Pittsburgh (106 percent), New Orleans (76 percent) and Baltimore (73 percent). The highest average gross profit in dollar amount for Q2 with more than 100,000 each occurred in San Jose, Washington, D.C., San Diego, Los Angeles, and Seattle.