flipping houses

Photo: Charles & Adrienne Esseltine/Flickr

The number of houses being flipped in the United States in 2014 reached its lowest level since 2011 according to a new report by RealtyTrac. About 136,269 homes, or 5.4 percent of all single family homes sold, were flips.

In Q4-2014, these transactions picked up steam with 32,578 single family homes flipped, or 5.3 percent of all single family home sales during the quarter. While the share of flips was up 11 percent from the third quarter, they were down 12 percent from the same time in 2013.

Some cities attracted a high percentage of house flippers with the Los Angeles and Miami metro areas both home to two ZIP Codes where flips made up more than a quarter of all home purchases (see table below).

While the amount of house flips fell year-over-year, profits rose. The housing data company found that the average gross profit — the difference between the purchase price and flipped price — was $65,993 in the fourth quarter of 2014, a 37.1 percent gross return. Compare that to the third quarter of 2014, which saw an average gross profit of $65,285 (36.5 percent gross return). There was also a year-over-year boost, since the average gross profit in Q4-2013 was $63,017 (36.4 percent gross return).

“Investors have picked much of the low-hanging fruit when it comes to home flipping over the past three years since home prices bottomed out in the first quarter of 2012,” said Daren Blomquist, vice president at RealtyTrac.

“As home price appreciation slows to single digits in most markets, flippers need to be more selective and creative about the properties and neighborhoods they target.”

RealtyTrac looked into ZIP codes where there were at least 10 single family home flips completed in the fourth quarter of 2014. Of those, the top 10 are areas that saw an average gross return on investment of 120 percent or higher. Three of the ZIP codes were in the Baltimore-area.

Top 10 ZIP Codes for Highest Returns in Q4

City Metro Area ZIP Code % Total Sales Q4 2014 Avg Gross ROI
Baltimore Baltimore-Towson, MD 21218 11.0% 208.6%
Saint Louis St. Louis, MO-IL 63139 14.0% 163.9%
Jacksonville Jacksonville, FL 32205 13.8% 157.0%
Chicago Chicago-Naperville-Joliet, IL-IN-WI 60643 11.8% 153.7%
Berwyn Chicago-Naperville-Joliet, IL-IN-WI 60402 11.5% 149.7%
Gwynn Oak Baltimore-Towson, MD 21207 13.2% 149.7%
Ferndale Detroit-Warren-Livonia, MI 48220 6.7% 141.5%
Baltimore Baltimore-Towson, MD 21213 6.7% 137.9%
Saint Louis St. Louis, MO-IL 63116 13.3% 127.7%
Capitol Heights Washington-Arlington-Alexandria, DC-VA-MD-WV 20743 19.5% 119.9%

Among the 10 ZIP codes, the average purchase price was $66,695. After the flip, the average gross profit was $99,419 with an average gross return of 150.9 percent.

RealtyTrac also looked into the top ZIP codes for flips by zeroing in on areas with at least 10 single family home flips completed in the last quarter. These ZIP codes saw flips make up 25 percent or more of all single family home sales during the quarter.

Top 10 ZIP Codes for Flips in Q4:

City Metro Area ZIP Code % Total Sales Q4 2014 Avg Gross ROI
Inkster Detroit-Warren-Livonia, MI 48141 29.4% 38.2%
Los Angeles Los Angeles-Long Beach-Santa Ana, CA 90003 28.8% 47.8%
Memphis Memphis, TN-MS-AR 38116 27.7% 52.1%
Opa Locka Miami-Fort Lauderdale-Pompano Beach, FL 33055 27.4% 64.8%
Miami Miami-Fort Lauderdale-Pompano Beach, FL 33169 26.8% 65.5%
Jacksonville Jacksonville, FL 32254 26.4% 29.7%
Los Angeles Los Angeles-Long Beach-Santa Ana, CA 90002 26.2% 47.1%
Harper Woods Detroit-Warren-Livonia, MI 48225 25.3% 50.5%
Tampa Tampa-St. Petersburg-Clearwater, FL 33634 25.0% 61.6%
San Diego San Diego-Carlsbad-San Marcos, CA 92105 25.0% 39.0%

Among the top 10, the average purchase price for homes to be flipped was $110,611, the average profit was $95,700 and the average gross return of 49.6 percent.

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