Flipping Houses is no longer profitable

Home Flipping Orange CountyThe monetary appeal of flipping a home is starting to dissipate as the market returns to historical trends. Back in the second quarter of 2013, 6.2% of homes were flipped, compared to just 4.6% in the second quarter of 2014, according to that newest Residential Property Flipping Report from RealtyTrac.  

This is also down from 5.9% in the first quarter of 2014. But when looking at home price trends, it comes as no surprise.

According to Trulia’s home price report, for the first time in more than two years, none of the 100 largest U.S. metros had a year-over-year price increase above 15% as home price increases start to decrease in pace.

“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 at 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,” Blomquist added.

On average, investors made a gross profit of more than $46,000 per flip on homes flipped in the second quarter of 2014, a 21% gross return on the initial investment.

RealtyTrac reported that 8.1 percent of residential sales in Nevada from April through June involved homes that had been purchased and subsequently resold within 12 months. That was exceeded only by the 10.2 percent share in the nation’s capital, the real estate analytics company from Irvine, Calif., reported.

Nevada’s share of sales that involved flipped homes dropped from 9.1 percent in the second quarter of 2013. That was consistent with the national trend, with flipping in the United States hitting a two-year low.

Gross profits from flipping are also on the decline nationally, but more so in Nevada. Flippers statewide earned a mere 4.8 percent gross profit on flips based on home purchases that averaged $195,649 and sales that averaged $204,952, RealtyTrac reported. That was the lowest profit margin among 30 states whose data was available.

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