Housing Bubble 2.0: "More Flipping, Bigger Profits, In Less Time" With 156,862 Homes Flipped In 2013

Tyler Durden's picture

Late 2013 pending home sales may have been horrible, and were blamed on the weather (though as even Goldman notes "The broad-based declines by region suggest that colder-than-average weather was likely not the primary driver, given slightly warmer-than-average temperatures on the Pacific coast in December") , but it appears the weather had zero adverse impact on that other, most pernicious home "selling" activity: flipping.

The topic of home flipping is not new here ("Flip That House" In These Bubbling Cities, Housing Bubble 2.0 Edition: "25 Markets Where Flipping Homes Is Most Profitable", etc) - indeed that best-known flashback of the last housing bubble is easily one of the best indications just how fragile the current housing bubble truly is as investors gobble up real estate not with the intention of keeping it but merely to sell to the next greater fool, in the process setting marginal prices based purely on the availability of cheap money, money which has now been tapered by $20 billion in the past two months. However, to get the full picture on just how pervasive "house flipping" has become, we go to the source, RealtyTrac, which has just released its 2013 summary of this troubling trend.

In summary:

  • 156,862 single family home flips — where a home is purchased and subsequently sold again within six months — in 2013, up 16 percent from 2012 and up 114 percent from 2011.
  • Homes flipped in 2013 accounted for 4.6 percent of all U.S. single family home sales during the year, up from 4.2 percent in 2012 and up from 2.6 percent in 2011

Why are flippers flipping? Simple: they make a killing:

The average gross profit for a home flip — the difference between the flipped price and the price the flipper purchased the property for — was $58,081 for all U.S. homes flipped in 2013, up from an average gross profit of $45,759 in 2012. The average gross profit for homes flipped in the fourth quarter was $62,761, up from $52,746 in the fourth quarter of 2012.

Who is doing the flipping? Why the uber-rich of course, selling hot potatoes to each other, and betting the momentum continues:

  • The biggest increases in flipping nationwide occurred on homes with a flipped price of $400,000 or more. Although flipping increased across all price ranges, flips on homes with a flipped sale price above $400,000 increased 36 percent from 2012, while flips on homes with a flipped sale price at or below $400,000 increased 17 percent from 2012.

However, now that the bubble has likely burst, flipping is dlowing down:

  • Flips accounted for 3.8 percent of all sales in the fourth quarter, down slightly from 3.9 percent of all sales in the third quarter and down from 7.1 percent of all sales in the fourth quarter of 2012 — the highest percentage of sales represented by flips in a single quarter since RealtyTrac began tracking flipping data in the first quarter of 2011

And visually:

More from the full flipper report by RealtyTrac:

The average time to complete a flip nationwide was 84 days in 2013, down from 86 days in 2012 and down from 100 days in 2011.

“Strong home price appreciation in many markets boosted profits for flippers in 2013 despite a shrinking inventory of lower-priced foreclosure homes to purchase,” said Daren Blomquist, vice president of RealtyTrac. “For the year 21 percent of all properties flipped were purchased out of foreclosure, but that is down from 27 percent in 2012 and 32 percent in 2011. Meanwhile flipped homes were still purchased at an average discount of 13 percent below market value in 2013, the same average discount as 2012, indicating that investors are finding discounted buying opportunities outside of the public foreclosure process — particularly in those markets with the biggest increases in flipping for the year.”

Major metro areas with big increases in home flipping in 2013 compared to 2012 included Virginia Beach (up 141 percent), Jacksonville, Fla., (up 92 percent), Baltimore, Md. (up 88 percent), Atlanta (up 79 percent), Richmond, Va., (up 57 percent), Washington, D.C. (up 52 percent) and Detroit (up 51 percent).

Major markets with big decreases in home flipping in 2013 compared to 2012 included Philadelphia (down 43 percent), Phoenix (down 32 percent), Tampa (down 17 percent), Houston (down 17 percent), Denver (down 15 percent), Minneapolis (down 9 percent), and Sacramento (down 5 percent).

 

Broker perspectives

“Investors have not lost interest in purchasing and flipping homes. In fact, now that we are seeing home price appreciation they are more interested than ever,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty, covering the Oklahoma City and Tulsa, Okla., markets.  “The challenge for many would-be flippers in our markets is a shortage of available inventory to flip, as evidenced by the decrease in the number of homes flipped in both Tulsa and Oklahoma City in 2013 compared to 2012.”

“New Hampshire home prices did not depreciate as much as other sections of the country, so we never experienced a tremendous amount of distressed inventory, which makes it difficult for people to find inexpensive properties they can flip. So it follows that gross flipping profits have fallen in our market compared to a year ago,” said Steve McGuire, vice president of business development at Berkshire Hathaway HomeServices Verani Realty, covering the Manchester, N.H., market.  “When considering whether or not to flip a home it’s also important to note that house flipping is not for the faint of heart, because there are so many variables that could affect the sales transaction, price and profit.”

“The Denver housing market is still experiencing record-low inventory levels, which causes the best potential flip properties to be few and far between,” said Chad Ochsner, owner of RE/MAX Alliance covering the Denver and Boulder, Colo., markets.  “We have seen a resurgence of opportunities for fix-and-flips in the Boulder market due to a strong increase in home price appreciation, but the distressed home market has dropped by about half making it a challenge to find the right property.”

“February and March can be a great time to buy a fix and flip home to realize the spike in homes values that usually occurs during the spring and early summer buying season,” he added.

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unrulian's picture

people never learn

BandGap's picture

The race to squeeze as much as you can before the BOOM is what this is all about.

There are at least 3 TV programs (my wife loves them) that deal with this shit. They make it seem like "fun".  Until the music stops.

qqqqtrader's picture

great, while more rich people are flipping houses

more soon to be poor people are flipping burgers

TheRideNeverEnds's picture

And the illegals will have to compete with robots.

 

http://www.zerohedge.com/news/2014-01-12/meet-smart-restaurant-minimum-w...

 

I think the real question is once we surfs become totally obsolete and redundant to TPTB will they keep us around just for their amusement or what? 

Fox-Scully's picture

Just a preview for the Hunger Games.

maxmad's picture

all I know is that my rent has virtually double over the last 8 years, so whats the right way to go??

CheapBastard's picture

Rents have dropped for the most part in my area. They popped up for awhile two years ago, then stagnated and are about 10% lower now off their highs.  Builders added over 4,000 new houses and apartment complexes flood the former cow pastures. Those massive complexes give 1-3 months free rent so isolated house rentals have a tough time competing.

Who knows where they will go from here?

The Vineyard's picture

Hey, squeeze out every nickel possible.  Why?  When interest rates get raised, this house of cards is going down.

Bunga Bunga's picture

At the last crash funds rate was 5%. Now it is zero. Do the math.

johnconnor's picture

True story: last weekend I met up with an old friend (mid 30's, well educated, nice guy) that is a school teacher. Anyway and making the story short: He has inherited some money from the family and is going to leave teaching and start being a "full time flipper". He was absolutely conviced that with he will flip 4-5 houses a year and after repairs and expenses it will be a super easy to net over $25,000 per house and through this he will make a lot more money with less work and no risk, being fulish to actually work for wages. This is in Dallas where a median house is $130-200K.Of course I tried to warm him on the risks and that by quitting teaching he will miss the sweet pension he will be getting in a few years down the line, but he won't listen. Articles like this, and seeing "Joe next door" becoming professional flippers are telling me that the mege crash of real state is months away, maybe just weeks...

krispkritter's picture

 'There's a sucker born every minute...'

maxmad's picture

Trying to fiqure out who the suckers is???  The guy who is down 20% since he purchased is home is 2008 or the guy who rents, like me, and has nothing to show for it and rent has doubled over the last 8 years.....

maxmad's picture

Either way I am idiot...

Dr. Engali's picture

Is it February yet? Because it sure feels like groundhog day.

Spastica Rex's picture

Imbolc - a cross-quarter day, halfway between the solstice and the equinox. Crossing points are scary in European folklore. Criminals were often gibbeted at crossroads.

Also:

St. Bridgit's Day

Candlemass

Presentation of the Lord

And it's my birthday!

 

tip e. canoe's picture

thanks for the reminder, perfect day to winter sow some seeds.

also it's the last day of the Year of the Snake (in the West at least).

auspicious day for a birthday, cheers!

greatbeard's picture

>> And it's my birthday!

That makes it easy to remember.  My sister's birthday is Summer Solstice.  We always exchange humorous emails about it.  I'll have to send her a happy Imbolc day email.

 

Thanks for the new, to me, word.  Me likes words.

Dr. Engali's picture

Well happy birthday Rex. I wish you all the best in this upcoming year.

A Nanny Moose's picture

What if there isn't a tomorrow?! There wasn't one today!

Sudden Debt's picture

Why do people buy it from these houseflippers and don't look for themselves?

I mean... if you can find it 50K cheaper if you look for them... paint the grass green... kill the neighbours dog...

 

Winston Churchill's picture

Three houses I looked at back in August were flippers(listings were incorrect).

trying to sell.

They are still on the market after several price reductions.

That bibble (tm)didn't last long.

tip e. canoe's picture

from bubbles to bibbles to bobbles to babbles

(tm)'s optional ;~)

object_orient's picture

Regular buyers with FHA financing and little money down can't compete with all-cash offers from investors on discounted fixer properties.

You need an inside deal, all cash, or will pay a large premium. 

mayhem_korner's picture

 

 

It is a sign that things are broken beyond repair tht durable, physical assets has become a "trade." 

Take out the spec churn, and what you've got left is nothing but a rag doll1 of a housing market.

1Wilkes, Uncommon Valor

starman's picture

bought in 09 at 750K sold in may 2013 all cash ...........1.250K

TAX free! when the stock and real estate market corrects Ill be back shopping :] 

Seasmoke's picture

Sounds great. But no young kids, I guess. And where do you live since May 2013.... nicer area. More expensive. Worse area. More dangerous ???

Selling for a Profit is great, but we/you still need a roof over your head. No ?

Skiprrrdog's picture

To heck with the flippers and the banks. The wife and I sold our house, are renting now, and when we get tired of that we might buy a travel trailer and park it in a wal-mart parking lot, that way we will be within walking distance of all that chinese crap...

Obama_4_Dictator's picture

My Wife loves all those flipper show, me, personally I could puke.  Bunch of lynatic freaks that really offer nothing to society.  I could not belive that they were back on TV again.  We are getting very, very close to the top agian!

the grateful unemployed's picture

the flipper reality shows help educate the public about what flippers are really doing (if you're informed you can discount the flippers work and flipping is no longer profitable), it also proves how corrupt television is, i watched a young family buy a home at auction (after paying more than they had planned) only to find out the place had been sabotaged, cement poured into the toilets. etc..  so the buyer called his insurance company, and they made good on the damages??!! well not for you and me i think, but in the interest of happy endings on TV they were bailed out by insurance on something that was damaged before they bought it... and if an insurance company has a large portion of MBS maybe they are inclined to help out the flipping business in any way they can, while you and i pay the premiums

 

Gromit's picture

Correct - this article is bullshit.

Flipping worked well (San Diego)  in 11 and 12 but since the hedgies piled on I couldn't compete.

Profit margin at best  11% pre interest for a five month turnaroud.

El Diablo Rojo's picture

I live just north in Temecula.  When I looked to buy a house in 2013, the houses that were listed were done as a formality. The banks had already done deals for cash with the flippers, that I would have had to take a loan out for (at the listed price, I would have).  The houses were back on the market in less than 60 days, with an average bump of 68-75K!  No joke. 

Fuck flippers.  They keep a working family man like me from owning a home.  

the grateful unemployed's picture

yeah and who benefits from reinflating the housing bubble, not you and me

Blano's picture

I only pass them by, still that dude in Vegas is the worst.  He needs to be bitch slapped, especially the way he treats his wife.  She'd kind of a bitch too, but at least she's somewhat smokin' hot.

Bunga Bunga's picture

No no no this time is different. We have Facebook, Twitter & Netflix which wasn't around then. Right?

Seasmoke's picture

Looks like that gay guy Jeff Lewis will be back in business. Good for him !

Obama_4_Dictator's picture

I jsut love gays and real estate agents - 2 of my favorite things!! The world could use more!

John Law Lives's picture

If so, there is a TV show on Bravo, 'Million Dollar Listing Los Angeles', that you might like.

youngman's picture

Many of these houses need a Flipper...they have been stripped and will need to be fixed up before some end user will buy them....appliances need replacing..maybe even the plumbing and wiring as it might have been stripped of everything...Flippers serve a purpose I think...the Bankers will not do it...they do not know how to do it..they probably dont even know what they own......

Blankenstein's picture

Or maybe the buyer could pay a lot less for the house and hire a contractor of his choice to fix the problems, instead of paying some unskilled twit a ridiculous amount of profit.

Bunga Bunga's picture

After seeing how flippers work, I would never buy a flipped house. Fresh paint, stainless appliances and granite counter tops on rotten wood you actually had to scrap - what a waste of money. Most houses need at minimum wiring, plumbing, insulation, windows, heating completely replaced. Instead they mount a so-much-energy-saving Nest on a 20 year old furnance, while most heat gets lost through windows and walls anyway. People judge assets by their wrapping and believe it was a good investment. Great economy were people can be fleeced easily.

the not so mighty maximiza's picture

 Going to need a bigger spatula

RockRiver's picture

Not sure I understand all the hate for flipping....

 

If a house can be bought and fixed up to be sold what's the big deal?

 

I suppose we shouldn't fix up cars to sell either?

youngman's picture

I change my underwear when I go to the Doctor....just seems like the right thing to do...

Fiat Burner's picture

Its not the flipping itself we hate, but the cheap money central planning that encourages it excessively.

El Diablo Rojo's picture

Fuck you. Why should I line your middleman pockets? Flippers don't really add value, just cost.  I could put my own counter top on. I can take bids from different roofing contractors just as easily as a flipper. I can hire an electrician to pull wire to a junction box with just a phone call.   Most of the time they cover up shit from the potential home owner. 

For the same reason I don’t want to give a dime to a real estate agent, I don’t want to give money to a flipper.  They don’t work for it; the value isn’t there for what they charge.

In the event you are NOT a flipper, I resend the fuck you.

 

conspicio's picture

**rescind**  def: take back, cancel <refused to rescind the order>

 

"resend"ing the fuck you would be "to send again" and therefore double the fuck you. Which I do not think that word meant what you think that word meant.

 

Class dismissed. Carry on with the fuck you-ing and meaningless but spirited exchange...

El Diablo Rojo's picture

You're right. Your spelling is great. I love that new cologne you are wearing. What is it, Pretentious?

I don't care if you correct the spelling; in fact I appreciate the heads up so that I can correct it. I do take personal offensive to your dismissive, pretentious, elitist attitude toward my opinion.

It may not be meaningful to you, but then you haven't been in a fight over housing for the last ten years.  You haven't had to deal with the arguments and hostility about not purchasing a house that I have had to endure.  Walk a mile in my shoes and you will know how much this means to me. Here is your sign, "Fuck YOU". 

Thanks for this link too. http://theoatmeal.com/comics/misspelling

 

RockRiver's picture

Fuck you. Why should I line your middleman pockets? Flippers don't really add value, just cost.  I could put my own counter top on. I can take bids from different roofing contractors just as easily as a flipper. I can hire an electrician to pull wire to a junction box with just a phone call.   Most of the time they cover up shit from the potential home owner. 

For the same reason I don’t want to give a dime to a real estate agent, I don’t want to give money to a flipper.  They don’t work for it; the value isn’t there for what they charge.

In the event you are NOT a flipper, I resend the fuck you.

 

If you don't find fair value in the house, don't buy it. Go buy another one....

 

Don't be a tool.....