Flipping Levels at an 8 Year High: These 5 U.S. Markets Are Seeing the Highest ROIs

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In a study just released today, RealtyTrac shares information about flipped properties* in its Q4 2015 U.S. Home Flipping Report. A total of 5.5 percent of all single family homes and condos, or 179,778 single family homes and condos, were flipped in 2015. This represents the first annual increase in shares of homes flipped following four consecutive years of decreases.

Of 110 metropolitan areas studied, 75 percent, or 83 markets, showed increases in the share of homes flipped, with a total of 110,008 investors or entities completing at least one flip — the highest number of flippers since 130,603 in 2007.

“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” said Daren Blomquist, senior vice president at RealtyTrac.

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via: RealtyTrac

12 Markets Beat Out 2005 Flipping Highs

The U.S. saw a peak in the number of active home flippers back in 2005, when a whopping 259,192 investors flipped at least one home. Flipping levels of 2015 for the most part did not approach that high, except for in 12 of the 110 metro areas studied, including:

  • Pittsburgh (19 percent above 2005 levels)
  • Memphis (18 percent above 2005 levels)
  • Buffalo, New York (12 percent above 2005 levels)
  • San Diego (4 percent above 2005 levels)
  • Seattle (4 percent above 2005 levels)
  • Birmingham, Alabama (4 percent above 2005 levels)
  • Cleveland (3 percent above 2005 levels)

Related: The Top 5 Hottest Fix and Flip Markets in the U.S.

Markets with the largest year-over-year increases in flips included:

  • Lakeland, Florida (up 50 percent)
  • New Haven, Connecticut (up 45 percent)
  • Jacksonville, Florida (up 41 percent)
  • Homosassa Springs, Florida (up 40 percent)
  • Akron, Ohio (up 37 percent)

The market with the highest level of homes flipped nationwide was Miami, with flips representing 8.6 percent, or 10,658, of all home sales for the year — up 4 percent from 2014.

via: RealtyTrac

via: RealtyTrac; click here for an interactive map

5 Markets With the Highest Flipping Profits

The gross profit** of homes flipped across the U.S. was the highest since 2005, at an average of $55,000 nationwide. This number represents an average gross return on investment (ROI) of 45.8 percent, up from 44.2 percent in 2014.

The markets with the highest average gross ROI on flipped homes were:

  • Pittsburgh (129.5 percent)
  • New Orleans (99.2 percent)
  • Philadelphia (98.4 percent)
  • Cincinnati (89.7 percent)
  • New Haven, Connecticut (89.6 percent)

States with the highest share of flips in 2015 were:

  • Nevada (8.8 percent)
  • Florida (8.0 percent)
  • Alabama (7.4 percent)
  • Arizona (7.1 percent)
  • Tennessee (6.9 percent)

What Does This Mean for Investors?

Investors are likely jumping (back) on the flipping bandwagon in part because of increased confidence in a spreading housing market recovery. For more information on how markets across the U.S. performed in 2015, be sure to check out the BiggerPockets Real Estate Investment Market Index. Seeing as 2015 saw the lowest ratio of flips per investor since 2008 (1.63), it is likely that markets are seeing more inexperienced flippers attempting to begin in this niche.

“More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicates that flippers in 2015 continued to operate within relatively conservative margins,” observed RealtyTrac senior vice president Daren Blomquist, “Homes flipped in 2015 were on average purchased at a 26 percent discount below estimated market value and re-sold by the flipper at a 5 percent premium above estimated market value.”

Related: How I Got to Closing on a Million Dollar Fix & Flip Project [With Real Numbers!]

Still, only time will tell whether large increases in home flips will spell trouble for various U.S. markets.

“When home flipping numbers go up, it is usually an indication that the housing market is in trouble,” said Matthew Gardner, chief economist at Windermere Real Estate. “The problem with a rise in home flipping is that these sales artificially inflate home prices, making housing even less affordable for buyers and increasing the risk of a bubble.”

*For the purpose of this study, a flipped home was defined as a property sold in an arms-length sale for the second time within a 12 month period.

**Gross profit indicates the difference between the purchase price and flipped price of the property, not including rehab costs and other expenses incurred.

Investors: What are you seeing in your market? Do you think flipping will remain strong in the coming years?

Leave your comments below!

About Author

Allison Leung

A career writer, editor and blogger, Allison serves as the Lead Editor and Community Manager for BiggerPockets.com. In the past, she has channeled her passion and curiosity for all things real estate into her jobs by working in real estate law and heading a blog about real estate market trends. Don’t ask about her dog, Ace, unless you want to see approximately 500 photos of his (adorable) face.

10 Comments

  1. Kimberly Costello on

    Hi. I speak on behalf of local residents of a fast growing town in far north Dallas. Even though I have lived here since 1966, my husband and I are unable to secure a home for us that we qualify for. Investors are coming in and paying cash, and within 3 days, the home or lot is gone. I am not alone. There are many of us, according to my realtor, co-workers, and city officials I have spoken with. By mere economics, we are forced to continue in a rental market (of which flips their employees [every 6 months] and ownership [every three years] that is skyrocketing in costs that will force us on to the street. Seriously. Can’t just move anywhere. My husband needs a wheelchair accessible home, and they are very rare, even with apartments. So, my request is that the investors to please consider us “local yokels” when snatching up properties. This is killing our being a viable member of the middle class, in fact, placing us into the dying, lower middle class when it comes to any ANY kind of home ownership. You see our income is “too high” to qualify for subsidies, and “too low” to qualify for the cost of these homes! We are the working poor, getting poorer still. Unable to even help ourselves. I have vented and am done.

  2. Edward Synicky

    I am sorry for your predicament and would be glad to assist you in going over your finances and determine if there is an opportunity for you to purchase. Let me start by saying I have never flipped a home in my career, I am a buy and hold investor in real estate and in the equity markets. Historically about 40% of the population are renters for a number of reasons. A flipper can only flip when they find a home in disrepair, foreclosed on, bank owned etc. and often an eyesore to the community. You can’t flip the average home in the neighborhood. So in flipping the investor remakes the eyesore and the neighborhood is often very supportive and thankful for their efforts. The home is then sold to a homeowner, someone just like your self but perhaps in a better financial position. So a flipper does not prevent home ownership they enhance it. You need to address your personal situation and find out why you are not one of those buyers. I have 40 years of experience and offer you my free assistance to help you become one of those new homeowners. Feel free to contact me.

  3. Jay Martinez

    Well said, Edward. You are a kind person and I wish Kimberly the best. All my flips were distressed homes, uninhabitable. Low income buyers would not touch the units I buy because they need too much work. So I do not think we are displacing any class of people, middle or otherwise.

    • Kimberly Costello on

      Thank you, Edward, for your offer. I did bid 2x on the same foreclosure in Frisco. over 1700sqft, asking 129,900. I offered 118k. I was given an estimate of $60k to rehab and had been prequalified for 185k. That was the best I could do. The first accepted offer was full 129,900 and they were 203-k buyers. It fell through. I submitted again, same terms, and was denied. Told a cash buyer stepped in. The only thing I could figure is that they ‘gave a 203-k buyer’ an opportunity and it failed, so they were given a pass on dealing with me (utilizing the same financing). The home had been stripped of the entire HVAC, water heater and had no appliances. I know I could have worked it out, but the 203-k was a 75-day out process and I can’t blame the seller from nixing my offer. That is just one example of what we’ve gone thru since November. Now I’m down to checking into a modular home. I still have to find a lot; that is still a hurdle, but now rather than starting out at $126k for Tilson’s smallest home, I can get a halfway decent modular home, site built, starting at low 30’s. I hate going thru this avenue, but the numbers don’t lie, and the taxes on these larger homes in the burb’s good lord! By being unincorporated, perhaps a few dollars can be spared. And the modular home builder has the ability to work in handicap features that we need. If any of you have any other ideas to help, I would happily entertain them. We need to live as close to Frisco Texas, as I work there. My email is with yahoo at katitan. Thank you for your patience and concern!

  4. David L.

    I was just reading the same article yesterday. I always think it’s good to look at the macro economics. This particular one has me a little concerned coming in as a new investor. Although I’m not in the flipping industry, it still gives an indicator as to what’s going on with the buyers. It feels like there’s a mad rush to get in while rates are low. Btw, great last name Allison 😉

  5. George Gammon

    Extremely weak thinking on the part of Mathew Gardner.

    How does buying a house and adding value to it “artificially inflate” housing prices? If a house has a market value of x, and improving it gives it a market value of y, in no way is that increase in price artificial.

    That’s similar to saying AMG artificially inflate the price of Mercedes. It’s obvious the AMG will have a higher price because it’s a superior product. The same holds true for the rehabbed house.

    Adding value to something doesn’t artificially inflate the price. The excessive expansion of credit artificially inflates the price because it gives the buyers artificially inflated purchasing power.

    And let’s not forget, in most markets, the resale price of the flip will fall in line with current comps therefore most flips are bringing homes up to market value not pushing them beyond.

    Mr. Gardner is confusing credit expansion and value expansion…

  6. Ed Emmons

    Interesting that Frisco has more housing units available then households according to their website. Doesn’t sound like a real sellers market? I would have to believe there are some good deals there but you have to look where the retail buyers aren’t looking. In many communities there are government funds at low or no cost to assist making homes handicap acessable.

    • kimberly costello on

      Hi Ed. Frisco has two offers for homebuyers. One is assist with down payment. Second one is that after you own the home, you may qualify for rehab of the home you already own. So, the person requesting assistance has to be living in a home that is not user-friendly, then ask for assist. A person can’t come to the city first, find a home, then ask Frisco “hey, can you help us with this, so we can literally use this home?”. Sort of putting the horse before the cart. A couple can buy a home, THEN contact Frisco, see if they qualify for rehab assist….then its a matter of a gamble…will the city come through and help? If not, the homeowners are screwed and are stuck with a home that they can not fully use. These programs are based on income. My hubby and I are on the cusp of earning too much, according to Frisco, and not enough, according to the market. Oh, by the way, I’ve gone through two more properties that investors have paid cash for before we even GOT TO SEE THE PROPERTIES. Yeah. Gone before we could get the appointment confirmed to go see. One property had TWO CASH investors offers. We can’t win. We just can’t win. With the new companies and employees moving in from California and elsewhere for the next 2-3 years, we are being squeezed out and I think that by the summer’s end, there will be zero properties to buy, with or without a house, or even a lot…that is in our very modest budget of under $185k gone and we’ll be out for the next several years. If we were in our 20’s, 30′, 40’s or even early 50’s, a 30 yr loan can be dealt with. But I will be 58 in August, and I can’t see paying on a mortgage in my 90’s! For Pete’s sake! In 2007 the prices were good, but we had debt from ex-marriages to pay off, now we’re good with savings, but the market has passed us up. One last card has been dealt to us – home built in town 30 miles away from work, and with a handicapped hubby, 30 miles seems wayyyy too far, if I have to return home quick, or gas goes back to $3.50+ per gallon. It would break us and foreclosure…here we come! Arg!! Thanks for letting me vent.

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