IRVINE, Calif. – June 2, 2016 — RealtyTrac's Q1 2016 U.S. Home Flipping Report finds that 6.6 percent of all U.S. single-family home and condo sales in the first quarter of 2016 were flips – a 20 percent increase quarter-to quarter and 3 percent increase year-to-year.
The percent share of flips was still 26 percent below the 9 percent share at the peak of home flipping in the first quarter of 2006 – but was 55 percent above the recent trough in home flipping (4.3 percent in Q3 2014).
For the report, a home flip is a property sold in an arms-length sale for the second time within a 12-month period.
"After faltering in late 2014, home flipping has been gaining steam for the last year and a half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against," says Daren Blomquist, senior vice president at RealtyTrac. "While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker … and we are starting to see evidence of that pressure cooker environment in a handful of markets.
However, the current rate of home flipping "is not far above its historic norm, and home flippers in most markets appear to be behaving rationally and responsibly," says Blomquist.
In the first quarter, 71 percent of flipped homes were purchased with cash compared to 37 percent at the height of the flipping boom.
"Spending their own money rather than other people's money is keeping flippers conservative," says Blomquist. "On average, they're buying the homes they flip at a 27 percent discount below full market value and selling them at a 6 percent premium above full market value."
Florida metro areas with strong flipping numbers
Home flipping hits new all-time highs in 7 percent of U.S. markets, but in a few Florida metro areas, 1 in 10 home sales involved a flip.
One Florida area – Deltona-Daytona Beach-Ormond Beach – ranked third in RealtyTrac's top five for "highest share of flipping with 11.8 percent of sales a flipped home. Other U.S. cities in the top five include: Memphis, Tennessee (13.3 percent) and Clarksville, Tennessee (12.5 percent) in the top two spots, and Fresno, California (11.3 percent), and Visalia-Porterville, California (11.1 percent) in the last two positions.
Other Florida markets where the share of homes flipped surpassed the national average included Tampa (10.8 percent), Miami (9.5 percent) and Jacksonville (9.4 percent).
"There continues to be good opportunities for cash investors in the South Florida market," says Mike Pappas, CEO and president at the Keyes Company. "One out of 10 transactions in the first quarter were flipped investor deals yielding an average $65,000 gross profit with an average 51 percent gross ROI."
Gross flipping profit
Homes flipped in the first quarter yielded an average gross profit of $58,250 – a more than 10-year high and average 47.8 percent return on the original purchase price. The average gross flipping profit is the difference between the purchase price and the flipped price, and it doesn't include rehab costs and other expenses.
In addition to Flint, Michigan (105.8 percent return on investment), the top metro areas for return on investment (ROI) were in Pennsylvania: East Stroudsburg (212.1 percent), Reading (136.4 percent) and Pittsburgh (126.8 percent). In New Haven, Connecticut, the ROI was 104.8 percent.
One Florida city made RealtyTrac's list for an average gross ROI over 80 percent: Jacksonville with an 81.8 percent return.
© 2016 Florida Realtors®
Reprinted with permission. Florida Realtors®. All rights reserved.