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Home flippers back away as real estate turnover activity declines

High-end home flipping picks up, surges more than 30%

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Home flipping activity dipped 13% from the same period a year ago, with 32,993 single-family home flips recorded in the third quarter of 2013, RealtyTrac reported Thursday.

"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, vice president of RealtyTrac. 

Real estate investors made an average gross profit of $54,927 on single-family home flips in the third quarter, up 12% compared to an average gross return of $48,893 last year.

The uptick in gross profit was buoyed by an increase in high-end flips on homes sold off by flippers for $750,000 or more. A total of 968 high-end homes were flipped in the third quarter, up 34% from a year ago. 

"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. 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," Blomquist said.

Flips on homes priced between $1 million and $2 million climbed 42% year-over-year, while flips on homes priced between $2 million and $5 million jumped 350% year-over-year.

In addition, more than three-fourths of all high-end flips were in five markets: the New York metro area and four California markets — Los Angeles, San Francisco, San Jose and San Diego.  

However, home flipping activity fell from year ago levels in several former flipping hot spots such as Phoenix, Tampa, Orlando and Stockton, Calif., where flipping declined by 37%, 47%, 28% and 37%, respectively.

RealtyTrac summed up the experiences of many flippers after interviewing the CEO of an Oklahoma area real estate firm.

"As rent and home prices escalate and the number of available REOs continue to decline there are fewer people who are buying homes to flip. House flippers are kind of a misnomer as they’ve turned into what I like to call ‘holders’," said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty. “Being a house flipper meant buy it, paint it, sell it. Now it’s turned into buy it, paint it, rent it, and hold it.”

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