U.S. Home Flipping Drops Nationwide: Now Account for Only 3.7% of All Sales

RealtyTrac released its U.S. Home Flipping Report for Q1 2014, reporting that 3.7% of all U.S. single-family home sales were flips. Home flipping over all is down, dropping 4.1% from the fourth quarter in 2013, as well as declining 6.5% from the previous year's first quarter. The company defines flips as homes purchased and sold again within six months.

"Slowing home price appreciation early this year in many of the most popular flipping markets put some investors in danger of flying too close to the sun," said Daren Blomquist, VP at RealtyTrac. "But investors appear to have recalibrated their flipping strategy, accounting for the slower home price appreciation even if that means fewer flips. This is another good sign that this housing recovery is behaving much more rationally than the last housing boom, which was built largely on unfounded speculation rather than fact-based calculations."
The average sales price of a single-family home in the first quarter was $55,574 higher than the purchasing price. The gain reflects an unadjusted ROI of 30%. On average, flips in the first quarter took 101 days to complete, up from 92 days in the previous quarter.
"Investors interested in flipping houses are having to dig deeper into a new pool of inventory as the market surges," said Chris Pollinger, SVP of sales at First Team Real Estate, covering the Southern California market. "The affordable properties have quickly disappeared, pushing flippers into higher-priced properties with better margins and longer carry times."
According to RealtyTrac, 82% of all properties flipped in the first quarter were sold to owner-occupants. 18% were sold to buyers with a different mailing address than the property. Additionally, 43% of all properties flipped in the first quarter were all-cash sales to the new buyer.
Among metro areas with a population of at least 1 million and at least 25 single family homes flipped in the first quarter, those with the highest share of flips in Q1 were New York, New York (10.2%); Jacksonville, Florida (10.0%); San Diego, California (7.1%); Las Vegas, Nevada (6.7%); and Miami, Florida (5.9%).
Among major metros, those with the biggest decrease from a year ago in home flipping as a share of all sales were New Orleans, Louisiana (down 83%); Baltimore, Maryland (down 81%); Minneapolis, Minnesota (down 80%); Richmond, Virginia (down 80%); Detroit, Michigan (down 76%); and Washington, D.C. (down 73%).