There is an old joke:
- Collect Underpants
Here is the "new normal" version:
- Move to Daytona Beach
- "Flip That House"
- 82% Profit
Gratuitous photo of the Bluth Model Home:
With sign after sign of Ben Bernanke's second housing bubble hitting everyone squarely in the face, and yet with pundit after pundit rushing to deny that there is in fact a housing bubble, all one can do is smile.
Some, however, such as those who have been following our amusing deja vu parody series titled "Housing Bubble 2.0 Edition: "25 Markets Where Flipping Homes Is Most Profitable" will know that the bubble can be all too lucrative if mostly to those hedge funds who are eligible for the subsidized REO-To-Rent program, and can subsequently flip the hot potatoes properties among each other giving the impression of a recovery.
As it turns out the grotesque days of the first housing bubble are now being flatly trounced by the surreal second coming of the housing bubble, where courtesy of RealtyTrac we find that the old gross maximum profit potential of 63% realized in Orlando, FL house flipping, has two short months been eclipsed by flipping a house in Daytona Beach, generating a mindblowing 82% "flip that house" return!
In brief: in the first half of 2013 there were 136,184 single family home flips — where a home is purchased and
subsequently sold again within six months — in the first half of 2013,
up 19 percent from a year ago and up 74 percent from the first half of
2011. Real estate investors made an average gross profit of $18,391 on single
family home flips in the first half of the year, a 9 percent gross
return on the initial purchase price. That was up 246 percent from an
average gross return of $5,321 in the first half of 2012 and an average
loss of -$13,206 in the first half of 2011.
A 9% return in under 6 months, so roughly 20% annualized, from flipping houses: nope, no bubble here at all.
RealtyTrac's other stunning findings, which also
Real estate investors who flipped homes in the first half of the year purchased those homes at a discount of 5 percent below estimated market value on average, and sold them at a premium of 1 percent above estimated market value on average.
“The Reno-Sparks area was one of the first to see an increase in distressed sales and like many of our sister markets we are one of the first out. The 32 percent decline in flipped homes in the last year is likely due to the decrease in distressed sales and it’s actually a positive sign of the housing recovery we are experiencing,” said Craig King, COO at Chase International brokerage serving the Reno and Lake Tahoe markets. “While there will always be a market for sharp home flippers our marketplace numbers indicate that home flipping here is back to a place best left to the professionals.”
“Many investors who buy homes to flip have holding restrictions placed on them, so they rent the property with the idea that after a certain period of time they’ll put it on the market and sell it,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty in Oklahoma City and Tulsa. “There is a pronounced reluctance from these investors to sell now because rental rates are skyrocketing, especially in Oklahoma City due to the tornado, and we are experiencing a 10 percent appreciation on home values. Many investors who may have intended to flip properties are not putting them back on the market because they can rent the property for a profit while it continues to appreciate.”
But even the flipping fun is tapering:
“While flipping continues to be profitable in most markets, particularly those where the home price recovery is still nascent and a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount, home flipping is tapering off in markets where fewer of those distressed bargains are available,” said Daren Blomquist, vice president at RealtyTrac. “Out of the 100 markets we analyzed for the report, 32 had declining flipping numbers, including perennial flipping hot spots like Las Vegas, Phoenix, Southern California and Atlanta. Still flipping was on the rise in more than two-thirds of the markets, including New York, Washington, D.C., Chicago and several Florida metros.”
“While flipping of homes continues to be of great interest to many people in the general public as they see this as an easy way to make a fast profit, the opportunity to buy and flip homes in Southern California is diminishing each month, as the price to purchase fixer-uppers continues to increase rapidly,” said Rich Cosner, CEO at Prudential California Realty covering Orange, Riverside and San Bernardino counties in Southern California. “The allure of a quick profit from flipping can entice many first-time home buyers but the gross profit does not take into account the costs of repairs, upgrades, cleanup and the money spent while owning the property. In some areas home prices have increased so much that there is little or no profit available to flip it.”
Finally to learn if house flipping offers a get rich quick scheme in your state, the next table is for you: