Home flipping is back – and Fla. a national hot spot
IRVING, Calif. – March 3, 2016 – According to RealtyTrac's Year-End and Q4 2015 U.S. Home Flipping Report, Florida trails only one other state, Nevada, for the number of home flips in 2015. RealtyTrac defines a home flip as a property sold in an arm's-length sale for a second time within a 12-month period.
Nationwide, property flipping involved 5.5 percent of all single-family and condo sales last year, an increase from 5.3 percent one year earlier.
"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.
Blomquist says it's not just the number of flips that's changing – it's also the people doing the flipping.
"We also see the flipping trend trickling down to smaller investors who are completing fewer flips per year," he says. "The total number of investors who completed at least one flip in 2015 was at the highest level since 2007, and the number of flips per investor was at the lowest level since 2008." The number of active home flippers peaked in 2005.
"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."
"The problem with a rise in home flipping is that these sales artificially inflate home prices, making housing even less affordable for buyers and increasing the risk of a bubble," says Matthew Gardner, chief economist at Windermere Real Estate in Seattle.
2015 U.S. homes flipped yielded an average gross profit of $55,000 nationwide – the difference between the purchase price and the flipped price without including rehab costs and other expenses. The average gross return on investment (ROI) was 45.8 percent, up from 44.2 percent in 2014 and 35.3 percent in 2005.
The Miami metro area had the most homes flipped last year in the U.S. –10,658 or 8.6 percent of all Miami-area home sales for the year, a 4 percent year-to-year increase.
Two Florida cities made the top five when looking at flips as a percentage of all home sales. Tampa (9.2 percent of all home sales) and Deltona-Daytona Beach-Ormond Beach (9.1 percent) ranked fourth and fifth, respectively. The three U.S. cities at the top: Memphis (11.1 percent); Fresno, Calif. (9.2 percent) and Las Vegas (9.2 percent).
Looking at the increase in the number of flips as a share of all single-family home sales, Lakeland, Fla., topped the list with a 50 percent increase. It was followed by New Haven, Conn. (up 45 percent); Jacksonville (up 41 percent); Homosassa Springs, Fla. (up 40 percent); and Akron, Ohio (up 37 percent).
"We continue to see distressed properties funnel through the pipeline in South Florida, which makes it ripe for investors to profit in a strong selling market," says Mike Pappas, CEO and president at the Keyes Company in South Florida. "There are always sellers that will discount for a quick cash sale and open the door for astute investors to make a good return by repositioning the property."
Two Florida cities ranked in the top 10 for flippers' return on investment. While Boise, Idaho, topped the list (85 percent increase) followed by Hartford, Conn. (51 percent increase); Ocala came in at No. 3 with a 49 percent increase, and Homosassa Springs followed with a 41 percent increase.
Overall, 8.0 percent of Florida home sales were flips, according to RealtyTrac. Only Nevada, at 8.8 percent, ranked higher. Alabama (7.4 percent), Arizona (7.1 percent) and Tennessee (6.9 percent) rounded out the top five list.
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