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House flipping is back—and you thought that was so 2007! Sure, the trend declined after the real estate market crash in 2008, came back a bit, and sagged again just last year. But the number of homes flipped in the third quarter of 2015 was up 18% from the third quarter of 2014.
So says RealtyTrac’s third quarter 2015 U.S. Home Flipping Report. The top spot for flipping is, somewhat curiously, Pittsburgh, where the average gross flipping return on investment was 78.4%. Other places that saw a hefty ROI were New Orleans (73.1%); York, PA (64.5%); Punta Gorda, FL (61.3%); and Clarksville, TN (59.6%).
Eighty-five percent of local markets saw increases, with Memphis, TN; Fresno, CA; Mobile, AL; Tampa, FL; and Daytona Beach, FL, showing the highest share of flipped homes.
“With the rapid rise of home prices in many markets because of the chronic shortage of inventory, it’s not surprising to see an increase in flipping activity,” said Jonathan Miller, president and CEO of Miller Samuel Real Estate Appraisers.
However, he said, “the word ‘flip’ has a different connotation than it used to. Flipping is more about distressed real estate moving from weak hands to strong hands than it is about carpenters and nurses quitting their jobs to get into the real estate business.”
As the Pittsburgh Post-Gazette noted, flippers “have been playing an important role in repopulating and revitalizing Pittsburgh neighborhoods where crumbling mansions, vacant row houses and run-down single family homes have blighted the landscape and pushed down property values.”
“By all accounts, vacant properties are a curse,” said a report by Smart Growth America titled “Vacant Properties: The True Costs to Communities.” They can lower the values of other properties, raise taxes for other homeowners, and, of course, make a street look so much worse.
But this doesn’t mean the nation is suddenly filled with benevolent, community-minded home flippers. It might mean that in desirable neighborhoods, prices are so high that flipping a home there just won’t garner enough profit. It makes sense to venture into neighborhoods in the most distress.
Some buyers of flipped homes may be especially ready for such hoods, especially millennials, the most coveted share of the home buyers’ market. Not only does the report break down where home flipping is hot, it also reveals where millennials, versus baby boomers, are buying the most flipped homes.
For those born between 1980 and 2000, Philadelphia County seems to be the hot spot. There, those selling to millennials averaged over 70% ROI.
Next in line? St. Louis, MO; Baltimore, MD; and Cumberland, NC—who knew so many millennials were itching to move to Cumberland?
A few other home-flipping hubs might surprise you, considering they don’t usually make the list of robust real estate markets: Montgomery and Davidson in Tennessee; Onslow and Durham in North Carolina; Leon, FL; and Multnomah, OR. We never would have thought that the home of a 611-foot waterfall, 30 minutes outside of Portland, would be a great place to profit from selling a home you bought less than a year ago.
As for best place to flip a home to boomers, it’s no big surprise: 12 of the 15 highest flipping markets were in Florida.
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