The process of purchasing a home and subsequently selling the property within six months, known as flipping, has slowed down in the third quarter.
According to RealtyTrac, there were 32,993 single-family home flips that took place in the third quarter, which is down on a quarterly and yearly basis by 35% and 13%, respectively.
Real estate investors who continue to participate in this process made an average gross profit of $54,927 on single-family home flips in 3Q13, the Irvine, Calif.-based analytic firm said. This is a 12% uptick from the third quarter of 2012 when an investor got back approximately $48,893 after making repairs to a purchased asset and then selling it.
“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 at RealtyTrac.
Even though the overall number of homes flipped fell in the third quarter, flipping figures were still up from a year ago in markets such as Atlanta (increase of 32%), Chicago (28%), and Seattle (23%), New York (14%), Detroit (13%), Los Angeles (11%), and Las Vegas (9%).
Conversely, several cities where home flipping was most prominent over the last several months saw its numbers fall from the same time period last year, including Tampa (down 47%), Stockton, Calif. (37%), Phoenix (37%), and Orlando (28%).
High-end homes that were sold by flippers for $750,000 or more helped drive the total gross profits up for investors. Flips on homes priced between $1 million and $2 million increased 42% year-over-year, while home flipping on properties between $2 million and $5 million rose 350% compared to 3Q12.
A total of 968 high-end properties nationwide were flipped in the third quarter, up 34% from a year ago. RealtyTrac said more than 75% of all of these high-end flips occurred in five markets: New York, Los Angeles, San Francisco, San Jose and San Diego.
“But 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,” Blomquist added. “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.”