posted on 22 May 2016
-- this post authored by Bin He
In Part I of this blog we discussed flipping activity - investors buying homes, repairing them and selling them within a short period of time for a profit - at the national level . Here we focus on flipping activity at the local metro level.
Figure 1 lists the top 20 markets, among the 86 largest Core Based Statistical Areas (CBSAs) that CoreLogic analyzed, with the highest shares of flipped properties in Q1 2016.
Only CBSAs in disclosure states were included in the analysis since sale values are not available for public access in non-disclosure states. According to CoreLogic data and analysis, Memphis, TN has the highest share of flipped properties, followed by Fresno, CA and Lakeland-Winter Haven, FL. For all CBSAs analyzed, the median gross profit per flipped property ranges from $23,430 in Birmingham-Hoover, AL to $124,000 in San Jose-Sunnyvale-Santa Clara, CA. The median percentage gross profit ranges from a low of 20.2 percent in San Jose-Sunnyvale-Santa Clara to 68.4 percent in Chicago-Naperville-Arlington Heights, IL. It takes an average of more than three and a half months to flip a property in Memphis and more than five and a half months to flip a property in Los Angeles-Long Beach-Glendale, CA.
Flipping activity is strongest among Florida CBSAs as of Q1 2016. Seven of the top 10 markets for flipping and eight of the top 20 markets for flipping are in Florida. Figure 2 shows that seven of the top eight Florida markets are experiencing increases in flipping activity as of Q1 2016 compared to one year ago with the exception of Lakeland-Winter Haven. It is too early to label it speculative behavior as you can see from Figure 2 that the level of flipping activity in those markets is still well below its peak prior to the market crash.
Figure 3 shows the 20 markets with the lowest levels of flipping activity in Q1 2016 among the 86 CBSAs analyzed. Hartford-West Hartford-East Hartford, CT has the lowest share of flipped properties, followed by New Haven-Milford, CT and Bridgeport-Stamford-Norwalk, CT. The median gross profit per flipped property ranges from $18,000 in Winston-Salem, NC to $120,000 in New York-Jersey City-White Plains, NY-NJ. The median percentage gross profit ranges from 13.3 percent in Honolulu, HI to 84 percent in Hartford-West Hartford-East Hartford. It is also not surprising to see that, on average, it takes longer to flip a property in lower-activity markets than in higher-activity markets. Also noteworthy is that home price appreciation has been lackluster in several of the lower-activity markets for flipping.
There are many factors that contribute to the level of flipping activity in a market. In a future blog we will explore a few of those factors and discuss the correlation between flipping activity, home price appreciation and other related market conditions.
1 A flipped property is defined as a property that is bought and sold within nine months. Non-disclosure states are not included in the analysis.
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