Welcome!

@DXWorldExpo Authors: Zakia Bouachraoui, Yeshim Deniz, Liz McMillan, Elizabeth White, Pat Romanski

News Feed Item

U.S. Home Flipping Down to 3.7 Percent of All Sales in First Quarter but Average Gross Returns Increase to 30 Percent

Flipping Down in Phoenix, Atlanta, Las Vegas, Up in Dallas, Seattle, Nashville; BuildZoom Analysis Finds Higher Rehab Expenditures Correspond With Better ROI

IRVINE, CA -- (Marketwired) -- 05/01/14 -- RealtyTrac® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released its Q1 2014 U.S. Home Flipping Report, which shows 3.7 percent of all U.S. single family home sales were flips -- where a home is purchased and subsequently sold again within six months -- in the first quarter of 2014, down from 4.1 percent in the fourth quarter of 2013 and down from 6.5 percent in the first quarter of 2013.

The average sales price of single family homes flipped in the first quarter was $55,574 higher than the average original purchase price. That gross profit provided flippers with an unadjusted ROI (return on investment) of 30 percent of the average original purchase price. The average gross profit per flip a year ago was $51,805 for an unadjusted ROI of 28 percent.

"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, vice president 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."

Other high-level findings in the report:

  • Flips completed in the first quarter took an average of 101 days to complete, up from an average of 92 days in the previous quarter and up from an average of 79 days for flips completed in the first quarter of 2013.

  • 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 the first quarter were New York (10.2 percent), Jacksonville, Fla., (10.0 percent), San Diego (7.1 percent), Las Vegas (6.7 percent) and Miami (5.9 percent).

  • 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 average gross ROI percentage on single family homes flipped in the first quarter were Pittsburgh (89 percent), Philadelphia (56 percent), Memphis (51 percent), Detroit (48 percent), and Seattle (48 percent).

  • Among those same major metros, those with the biggest increase from a year ago in home flipping as a share of all sales were San Antonio (up 52 percent), Nashville (up 50 percent), Indianapolis (up 47 percent), Austin (up 35 percent), Providence, R.I. (up 33 percent), and Oklahoma City (up 33 percent).

  • Other major markets with year-over-year increases in flipping as a share of all sales included Los Angeles (up 1 percent), Dallas (up 28 percent), Seattle (up 19 percent), Houston (up 29 percent), and Portland (up 2 percent).

  • Among major metros, those with the biggest decrease from a year ago in home flipping as a share of all sales were New Orleans (down 83 percent), Baltimore (down 81 percent), Minneapolis (down 80 percent), Richmond, Va. (down 80 percent), Detroit (down 76 percent), and Washington, D.C. (down 73 percent).

  • Other major metros with year-over-year decreases in flipping as a share of all sales included New York (down 37 percent), Phoenix (down 39 percent), Riverside-San Bernardino in Southern California (down 22 percent), Atlanta (down 57 percent), Chicago (down 29 percent) and Las Vegas (down 9 percent).

  • Among all metro areas nationwide those with the highest volume of flips in the first quarter were New York (1,791), Phoenix (894), Los Angeles (828), Miami (749), and Riverside-San Bernardino in Southern California (627).

  • 82 percent of all properties flipped in the first quarter were sold to owner-occupants; 18 percent to buyers with a different mailing address than the property.

  • 43 percent of all properties flipped in the first quarter were all-cash sales to the new buyer.

  • 58 percent of all properties flipped in the first quarter were 3-bedroom homes, 21 percent 4 bedroom homes and 17 percent 2-bedroom homes.

Increasing rehab expenditures on flips corresponds with greater ROI
BuildZoom (www.buildzoom.com), a Big Data company that uses building permit and licensure information to help consumers hire contractors, performed an in-depth analysis with RealtyTrac to understand how home improvement expenditures can impact real estate property values.

RealtyTrac home flipping data was matched with corresponding building permit records, from January 2011 to March 2014 in seven major US cities: San Francisco, Denver, Atlanta, Scottsdale, Ariz., Sacramento, Orlando and St. Louis. Analysis was done using a blended set and on an individual basis.

"This is the first time the industry has been able to quantify how improvement expenditures impact property values," said Jiyan Wei, co-founder of BuildZoom. "The data clearly shows what a lot of shrewd investors have known for years -- that if executed properly, improvement expenditures will yield a positive ROI.

"A lot of questions remain but we're excited about our ability to answer them through this collaborative platform," Wei added.

Here are some of the high-level findings of the analysis:

  • Flips that could be associated with building permits, outperformed the industry average. Unadjusted return-on-investment (ROI) was determined by looking solely at the purchase and sales prices for flipped properties. In the overall set, the median ROI was 13 percent compared to 50 percent across flips with at least one permit.

  • The median expenditure on improvements for flips during the three-year time period was $4,800, representing 3.34 percent of the original purchase price of the property.

  • Cities with the highest median improvement expenditures for flips were Atlanta ($18,250), Scottsdale, Ariz. ($14,772) and San Francisco ($13,900).

  • Improvement expenditures were analyzed to measure their impact on adjusted ROI. The results indicate that increasing expenditures result in increasing ROI up to the point at which the expenditure represents around 23% of the original purchase price, at which point further expenditures result in diminishing returns.

  • Flips were broken into quartiles, based on the size of the improvement expenditure. Investors in the top quartile (who spent the most) experienced the highest ROI whereas those in the bottom quartile experienced the lowest ROI.

  • In San Francisco, ROI was analyzed based on the type of improvements performed. Kitchens, bathrooms and windows were all strong indicators of a high ROI.

Broker perspectives
"The percentage of flips is down as we have experienced a drop in overall inventory," said Wesley Hardin, a managing broker for RE/MAX Alliance, covering the Denver, Colo., market. "Flipping profits are up due to the increase in home price appreciation, and the time it takes to complete a flip has increased as well."

"Investors interested in flipping houses are having to dig deeper into a new pool of inventory as the market surges," said Chris Pollinger, senior vice presidential 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."

"The number of homes being flipped for investor purposes within the Ohio markets has declined during the first quarter of 2014, with much of the decline attributed to a lack of available inventory for smaller investors to choose from," said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton, Ohio markets. "Institutional investors have increased their holdings during the first quarter of 2014, which has created noticeable pressure in available investment home inventory throughout Ohio, and equally contributed to rising equity and prices for investors fortunate enough to find qualifying inventory to flip."

Report methodology
RealtyTrac analyzed sales deed data and automated valuation data for this report. A single family home flip was any transaction that occurred in the third quarter where a previous sale on the same property had occurred within the last six months. To determine the top 15 markets for profitable flipping, RealtyTrac narrowed the metro list to only those with at least 100 flips in the third quarter and where flipping had increased from the previous year sorted by total gross profit, in descending order.

Data Licensing and Custom Report Order
Investors, businesses and government institutions can contact RealtyTrac to license bulk foreclosure and neighborhood data or purchase customized reports. For more information contact our Data Licensing Department at 800.462.5193 or [email protected].

About RealtyTrac
RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 125 million U.S. parcels that include property characteristics, tax assessor data, sales and mortgage deed records, Automated Valuation Models (AVMs) and 20 million active and historical default, foreclosure auction and bank-owned properties. RealtyTrac's housing data and foreclosure reports are relied on by many federal government agencies, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.

About BuildZoom
BuildZoom is a resource that helps people make smarter decisions about their most valued possession: their home. BuildZoom does this gathering its own information on general contractors from credible third-party resources including government agencies and non-profit organizations. In addition, BuildZoom shows consumers feedback provided by other BuildZoom members and gathers information directly from contractors to provide consumers with more information on who they are and examples of work they have done in the past.

Embedded Video Available

Embedded Video Available: http://www2.marketwire.com/mw/frame_mw?attachid=2580542

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

DXWorldEXPO Digital Transformation Stories
The deluge of IoT sensor data collected from connected devices and the powerful AI required to make that data actionable are giving rise to a hybrid ecosystem in which cloud, on-prem and edge processes become interweaved. Attendees will learn how emerging composable infrastructure solutions deliver the adaptive architecture needed to manage this new data reality. Machine learning algorithms can better anticipate data storms and automate resources to support surges, including fully scalable GPU-c...
Machine learning has taken residence at our cities' cores and now we can finally have "smart cities." Cities are a collection of buildings made to provide the structure and safety necessary for people to function, create and survive. Buildings are a pool of ever-changing performance data from large automated systems such as heating and cooling to the people that live and work within them. Through machine learning, buildings can optimize performance, reduce costs, and improve occupant comfort by ...
As Cybric's Chief Technology Officer, Mike D. Kail is responsible for the strategic vision and technical direction of the platform. Prior to founding Cybric, Mike was Yahoo's CIO and SVP of Infrastructure, where he led the IT and Data Center functions for the company. He has more than 24 years of IT Operations experience with a focus on highly-scalable architectures.
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
René Bostic is the Technical VP of the IBM Cloud Unit in North America. Enjoying her career with IBM during the modern millennial technological era, she is an expert in cloud computing, DevOps and emerging cloud technologies such as Blockchain. Her strengths and core competencies include a proven record of accomplishments in consensus building at all levels to assess, plan, and implement enterprise and cloud computing solutions. René is a member of the Society of Women Engineers (SWE) and a m...
Enterprises are striving to become digital businesses for differentiated innovation and customer-centricity. Traditionally, they focused on digitizing processes and paper workflow. To be a disruptor and compete against new players, they need to gain insight into business data and innovate at scale. Cloud and cognitive technologies can help them leverage hidden data in SAP/ERP systems to fuel their businesses to accelerate digital transformation success.
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.
Digital Transformation and Disruption, Amazon Style - What You Can Learn. Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 25+ years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to ...