Just Listed brings you the latest news and information from the Twin Cities-area commercial and residential real estate market and beyond from veteran reporters Jim Buchta and Kristen Leigh Painter.

House flipping fading fast, but highly profitable in Minnesota

Posted by: Jim Buchta under Buying, Foreclosures Updated: August 22, 2014 - 10:23 AM

House flipping is fading fast. Across the country only 31,000 single family homes were flipped — purchased and resold within 12 months — during the second quarter, accounting for just 4.6 percent of all U.S. home sales, according to RealtyTrac. That's down from 5.9 percent in the first quarter and 6.2 percent during the same period last.

In Minnesota, 3.2 percent of all closings were flips, down from 4.3 percent during the previous quarter and 10.9 percent last. Those flips garnered an average $83,000 gross profit, an above average 51.9 percent return.

Nationwide, investors averaged a gross profit of more than $46,000 per flip, a 21 percent gross return on investment. That's down from 24 percent during the previous quarter and 31 percent last year - the peak in percentage return on flips since RealtyTrac began collecting their data.

“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.”

Flip tid-bits:

  • Flips took an average of 187 days to complete.
  • High-end homes represented an increasing share of homes flipped in the second quarter. Homes with a flipped sale price of $750,000 or higher represented 4.10 percent of all homes flipped during the quarter, up 21 percent from a year ago, while homes with a flipped price of $400,000 to $750,000 represented 12.66 percent of all flips, up 10 percent from a year ago.
  • Flips on homes priced below $400,000 declined as a share of all flips from a year ago.
  • The best returns on homes flipped in the second quarter were on homes with a flipped sale price between $750,000 and $1 million, yielding a 41 percent average gross return on investment.
  • Homes in the $50,000 to $100,000 range had the second best return at 37 percent, followed by homes above $1 million at 35 percent.
  • Flips happened most often in Phoenix (1,438 flips), Los Angeles (1,371 flips) and Miami (1,290 flips). Miami was the only one of the three metro areas to see its home flipping share increase from a year ago.
  • Markets with the best return on flips: Pittsburgh (106 percent), New Orleans (76 percent), Baltimore (73 percent), Virginia Beach, Va. (66 percent) and Daytona Beach, Fla. (63 percent).

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