House flippers are finding it harder to get a good deal since foreclosures are at a seven-year low. But flipping can still be profitable — a recent report by RealtyTrac, real estate data sources shows that although flipping is down 13 percent in the third quarter compared to 2012, average profits are up 12 percent over third quarter last year.
Daren Blomquist, vice president of RealtyTrac, says, “That speaks to the fact that we’re past the bounce off the bottom in the housing market.”
For low- to middle-price levels of homes, house flippers (those who buy property and sell it again within six months) find the inventory less appealing. Blomquist says, “Foreclosures are a big source of potential purchases for flippers. With foreclosures properties down … real estate investors who are flipping don’t have that inventory to choose from.”
On the other hand, higher-priced homes (worth more than $750,000) are still profitable for flippers if they’re willing to commit the money, Blomquist says: “Flippers who are operating in today’s market are not the same breed as the flippers during the housing bubble.”
According to the RealtyTrac report, flipping is down substantially from a year ago in “former flipping hot spots” Phoenix; Tampa, Fla.; Orlando, Fla.; and Stockton, Calif.
While homebuyers in these markets may be glad to hear there’s less competition, Blomquist points out that “institutional investors,” backed by Wall Street money or private equity firms, are more active buying single-family homes that they will rent for profit.
These are usually markets where home prices are up, foreclosures are down and rents are increasing. These are markets where the “bottom” has already come and gone.
For the private homebuyer, it may sound daunting to be competing against cash buyers. But Blomquist says, “It’s still a great time to buy … just make sure you have solid financing so when you put in your offer, it will look like a good offer. The seller won’t have to worry.”
— Bettina Chang
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