Real estate investors made an average gross profit of $54,927 on single-family home flips in the third quarter,RealtyTrac reported.
The tracking company’s data indicates investors’ Q3 profit was up 12 percent from an average gross return of $48,893 in the third quarter of 2012. The higher gross profit was driven in part by an increase in high-end flips of homes that were sold for $750,000 or more.
High-end flipping during the July-to-September period was centered in four coastal California markets and New York. At the same time, the former flipping hot spots of Tampa and Orlando, Florida, as well as Phoenix saw marked slowdowns in home flips.
In total, RealtyTrac’s Home Flipping Report released Thursday shows 32,993 single-family home flips—where a home is purchased and subsequently sold again within six months—in the third quarter, down 35 percent from the second quarter and down 13 percent from the third quarter of 2012.
At the high-end of the price spectrum, some 968 homes nationwide were flipped in the third quarter, down 13 percent from the second quarter but up 34 percent from the third quarter of last year.
RealtyTrac says more than three-fourths of all high-end flips were in five markets: the New York metro area, Los Angeles, San Francisco, San Jose, and San Diego.
Nationally, flips on homes priced between $1 million and $2 million increased 42 percent year-over-year, while flips on homes priced between $2 million and $5 million increased 350 percent year-over-year.
In the Los Angeles metro, there were 2,116 homes flipped by investors in the third quarter with an average gross profit of $127,634. In the New York metro area, there were 2,075 flips, averaging $72,722 gross profit.
“Increasing home prices over the past 18 months combined with decreasing foreclosures have created a market less favorable to the high quantity of middle- to low-end bread-and-butter flips that we saw late last year and early this year,” said Daren Blomquist, RealtyTrac VP. “But the sharp rise in high-end flipping indicates there is still good money to be made for flippers willing and able to take on the additional risk of buying and rehabbing more expensive homes.”
Blomquist continued, “With that higher risk also comes the potential for higher reward. The average gross profit on each high-end flip equals more than four times the average gross profit on each flipped home in the lower price ranges.”
The number of single family homes flipped in the third quarter decreased from the previous quarter and a year ago nationally, but flipping numbers were still up from a year ago in some markets, including Atlanta (+32 percent), Chicago (+28 percent), Seattle (+23 percent), New York (+14 percent), Detroit (+13 percent), and Las Vegas (+9 percent).
Meanwhile, home flipping decreased substantially from a year ago in several former flipping hot spots such as Tampa (-47 percent); Stockton, California (-37 percent); Phoenix (-37 percent); and Orlando (-28 percent).
by Carrie Bay