RealtyTrac released its Q1 2016 U.S. Home Flipping Report, which shows that 6.6 percent of all single-family home and condo sales in the first quarter of 2016 were flips, a 20 percent increase from the previous quarter and up 3 percent from a year ago. It’s the highest rate of home flips since the first quarter of 2014.
For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period, based on publicly recorded sales deed data collected by RealtyTrac in more than 950 counties accounting for more than 80 percent of the U.S. population.
The flips in Q1 was still 26 percent below the 9 percent share at the peak of home flipping in Q1 2006, but was 55 percent above the recent trough in home flipping — which was 4.3 percent in Q3 2014.
“After faltering in late 2014, home flipping has been gaining steam for the last year-and-a-half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against,” RealtyTrac Senior Vice President Daren Blomquist said in a news release. “While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets.
“The good news is that — despite the 20 percent jump in the first quarter — home flipping nationally is not far above its historic norm, and home flippers in most markets appear to be behaving rationally and responsibly,” Blomquist continued. “In the first quarter, 71 percent homes flipped were purchased by the home flipper with cash — compared to only 37 percent who purchased with cash at the height of the flipping boom. Spending their own money rather than other people’s money is keeping flippers conservative.”
The share of home flipping reached new all-time highs in Q1 2016 in nine of 126 metropolitan statistical analyzed (7 percent) including Baltimore; Buffalo, N.Y.; Huntsville, Ala.; New Orleans; York-Hanover, Pa; Seattle; Virginia Beach, Va.; Bakersfield, Calif.; and San Diego.
Home flipping as a share of total sales increased from a year ago in 75 out of 126 metropolitan statistical areas analyzed for the report (60 percent). Among markets with a population of at least 1 million, those with the biggest increases in the rate of flipping were New Orleans (up 45 percent); San Antonio (up 34 percent); Nashville (up 26 percent), Tenn.; Cleveland (up 26 percent); Columbus, Ohio (up 23 percent); and Dallas (up 22 percent).
Homes flipped in Q1 2016 yielded an average gross profit of $58,250, the highest average gross flipping profit since Q4 2005 — a more than 10-year high. That represented an average 47.8 percent return on the original purchase price, the highest average gross flipping ROI since Q3 2012.
Markets with the highest average gross flipping ROI in Q1 2016 were East Stroudsburg, Pa. (212.1 percent); Reading, Pa. (136.4 percent); Pittsburgh (126.8 percent); Flint, Mich. (105.8 percent); and New Haven, Conn. (104.8 percent).