October 27, 2016

As Market Heats Up, Home Flipping Returns

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As Market Heats Up, Home Flipping Returns

The number of single-family home and condos being flipped is growing. In 2015, 5.5 percent of all single-family homes and condo sales – or 179,778 – were flipped that year, up from a 5.3 percent share in 2014.

Read more: Young Buyers Face Investor Competition

Last year saw the first annual increase in the share of flipped homes in four years, according to RealtyTrac’s Year-End and Q4 2015 Home Flipping Report. RealtyTrac defines a home flip as a property that is sold for the second time within a 12-month period.

“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” says Daren Blomquist, senior vice president at RealtyTrac. “Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year.”

The total number of investors who completed at least one flip last year surged to the highest level since 2007. Also, the number of flips per investor was at the lowest level since 2008, Blomquist notes.

“More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicates that flippers in 2015 continued to operate within relatively conservative margins,” Blomquist says. “Homes flipped in 2015 were on average purchased at a 26 percent discount below estimated market value and re-sold by the flipper at a 5 percent premium above estimated market value.”

Home flipping reached its peak in 2005 when flips accounted for 8.2 percent of all homes sold. However, in some areas, the share of homes flipped in 2015 was above the 2005 peak, including in:

  • Pittsburgh: 19 percent above 2005 levels
  • Memphis: 18 percent above 2005 levels
  • Buffalo, N.Y.: 12 percent above 2005 levels
  • San Diego: 4 percent above 2005 levels
  • Seattle: 4 percent above 2005 levels
  • Birmingham, Ala.: 4 percent above 2005 levels
  • Cleveland: 3 percent above 2005 levels

Meanwhile, the following metro areas posted the largest year-over-year increase in the share of flips:

  • Lakeland, Fla.: up 50%
  • New Haven, Conn.: up 45%
  • Jacksonville, Fla.: up 41%
  • Homosassa Springs, Fla.: up 40%
  • Akron, Ohio: up 37%

Source: RealtyTrac