In 2013, home flipping in the United States increased by 16 percent over 2012, and the practice increased by an amazing 114 percent during 2011. A report from the popular realty company RealtyTrac shows that a total of 156,862 homes were flipped in 2013, which accounts for 4.6 percent of all homes sold that year.
In 2012, flipped homes comprised 4.2 percent of all sales, and in 2011, the rate was only 2.6 percent. This increase in home flipping shows that the U.S. real-estate market is ripe for investors, and foreign investors are beginning to take notice.
What Is Home Flipping?
Home flipping is an investment practice that gained widespread popularity in the early 2000s, but it fell out of favor during the housing crisis that began in 2007. During this time, many investors were afraid to enter the market, and lenders had tightened their mortgage qualifications so much that it was impossible for smaller investors to get a foot in the door. Over the past two years, qualification requirements have loosened, and it is now possible to obtain a home loan with very little difficulty.
Home flipping is officially defined as buying a property and selling it again within six months. In most cases, property buyers find homes that can be purchased well below market value, such as foreclosures and homes sold at estate auctions. In some cases, these homes are completely sound and ready to sell again immediately. In other cases, however, a further investment must be made to repair or remodel a home, which increases its value enough to earn a respectable profit.
U.S. Property Flipping Statistics
Although the number of foreclosed and low-priced homes has decreased in 2013 compared to 2011 and 2012, appreciation in home values has made property flipping extremely profitable, according to Daren Blomquist, vice president of RealtyTrac.
Blomquist cites the fact that 32 percent of flipped homes in 2011 were foreclosures, but the rate has dropped in the last two years to 27 percent in 2012 and 21 percent in 2013.
Also in support of Blomquist’s statement is the fact that the average gross profit for a flipped property in the U.S. in 2013 was $58,081, which is significantly higher than the average profit of $45,759 in 2012. In addition, the average profit in the fourth quarter of 2013 was $62,761 while the fourth-quarter average in 2012 was $52,746.
The largest increase for home flipping was for high-value properties rather than lower-priced properties. Flipped homes that sold for $400,000 or more increased by 36 percent in 2013 over the previous year while the increase for homes that sold for less than $400,000 was only 17 percent.
Another significant factor for home flippers is that the average time to sell a house after it was initially purchased has decreased, which means that it is becoming easier to sell a USA investment property and realize a profit. In 2011, the average selling time was 100 days, and this decreased to 86 days in 2012. In 2013, the average time was only 84 days.
Top U.S. States for Home Flipping
• Average gross profit in 2013 – $103,384
• Percentage of home sales – 2.3 percent
• Average gross profit in 2013 – $99,999
• Percentage of home sales – 6 percent
• Average gross profit in 2013 – $98,122
• Percentage of home sales – 6.2 percent
4. New Jersey
• Average gross profit in 2013 – $92,744
• Percentage of home sales – 7.6 percent
5. New York State
• Average gross profit in 2013 – $91,970
• Percentage of home sales – 10.7 percent
6. Washington State
• Average gross profit in 2013 – $89,525
• Percentage of home sales – 3.4 percent
Top U.S. Cities for Home Flipping
Although the list of top states is a good reference for finding homes to flip, it is much more reliable to hone in on particular cities because the top cities are not necessarily in the top states. The best cities for home flipping and the average gross profit in each city for 2013 are as follows:
1. Daytona Beach, Florida – $51,657
2. Omaha, Nebraska – $85,537
3. Palm Coast, Florida – $43,721
4. Pittsburgh, Pennsylvania – $36,537
5. Tampa, Florida – $23,446
6. Port St. Lucie, Florida – $18,433
U.S. Cities with the Largest Increases in Home Flipping
Several U.S. cities saw large increases in home flipping from 2012 to 2013. Following are the top five:
1. Virginia Beach, Virginia – 141 percent increase
2. Jacksonville, Florida – 92 percent increase
3. Baltimore, Maryland – 88 percent increase
4. Atlanta, Georgia – 79 percent increase
5. Washington, D.C. – 52 percent increase
6. Detroit, Michigan – 51 percent increase
Author: Simon Worthington
Simon is the International Sales and Marketing Manager at Ray White Surfers Paradise, Gold Coast, Queensland, Australia and Ray White USA, Atlanta, Georgia.