The real estate market is returning to a more sustainable pace, and home flippers are taking notice. A mixture of slowing home-price gains and rising inventory levels is containing enthusiasm this year as the flipping industry reaches its slowest rate in two years. However, some markets are still witnessing impressive returns.
Home flippers – people who purchase a home and sell it again within 12 months – completed 31,000 single-family home transactions in the second quarter, according to a recent report from RealtyTrac. Home flips accounted for 4.6 percent of all domestic single-family home sales during the quarter, down from 5.9 percent in the first quarter, and down from 6.2 percent a year earlier. Flippers averaged a 21 percent gross return on the initial investment, compared to 31 percent in the second quarter of 2013. San Jose, California, posted the highest dollar amount of average gross profit at $258,968.
“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 of 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.” Returns on flipped homes peaked in early 2013.
Let’s take a look at the top 10 flipping markets based on average gross profit from RealtyTrac.