Real Estate: The Future of Flips

I just read RealtyTrac’s report about home flips which indicated the 2013 volume was up 16 percent from 2012 and up over 100 percent from 2011.

A flip is defined as a home being sold within 6-months of being purchased.  Most of these purchased properties are in need of repair and then “fixed-up” to sell.  We see these on the market and some are done exceptionally well while others seem to be surface repairs only.

⤥ Summer Fun Starts Here ⤦

⤥ Summer Fun Starts Here ⤦

⤥ Summer Fun Starts Here ⤦

⤥ Summer Fun Starts Here ⤦

The average gross profit for flips increased over $12,000 to $58,081 in 2013 which would make you believe we would see more flips in the coming year but as the market changes and fewer distressed properties are available investors are having difficulty finding properties suitable for flipping.  Flips were 3.8 percent of all sales in the 2013 fourth quarter which was down from 7.1 percent a year earlier.

If profits are increasing why is volume declining?  In 2013 over 20 percent of all flipped properties were purchased out of foreclosure which is down 7 percent from 2012 and 11 percent from 2011.

With foreclosures declining it is fair to say investors are having a harder time finding suitable properties to flip.  

Although flipping in 2013 increased in all price ranges the largest increase was in the higher price range.  Flips in the over $400,000 price increased 36 percent in 2013 while those under that price increased only 17 percent.
Areas of significant growth in flipping included Virginia Beach (+141%), Jacksonville (+92%) and Baltimore (+88%).  Some of the areas where declines have already started include Philadelphia (-43%). Phoenix (-32%) and our own market here is Sacramento which was down 5 percent.

We are out in the market everyday and prospective flip opportunities are still there.  These are the homes which are priced low because they need repair.   They are fewer in number and I suspect, with prices not growing rapidly there is a squeeze of flipper profit which means buyer should be particularly aware and make sure they know what they are buying if considering a flip.

Julie Jalone

If you or someone you know is considering buying, please feel free to contact me MagnumOne Realty office in Roseville at (916) 276-6883 and email at [email protected].

We specialize serving the needs of buyers and sellers of homes in the Roseville and Sacramento area including Sacramento, Placer, El Dorado, Sutter and Yuba counties.

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