House flipping's status as an aspirational American pastime took hits during the recession but, like disco or SUVs, it has never gone extinct.
It is returning -- with a vengeance. Cable TV shows glorify expert flippers and infomercials flog seminars for novice investors eager to dive into this risky market.
As many housing markets stage a recovery, there is a deep inventory of foreclosed or bank-owned properties that investors can tap at below-market prices.
House flippers have grossed an impressive $29,342 on average for each property in the first half of this year, according to RealtyTrac, a foreclosure industry data supplier. From purchase to sale, the average flipped home is turned in 106 days.
"A small player would have a better opportunity in a small town," says Christopher Leinberger, a real estate professor at George Washington University's School of Business.
And though small towns within large metro areas sport impressive gross profits, large housing markets, such as New York City, Washington, D.C., and San Jose, Calif., boast the most profitable average flipped home sales.
That's why home buyers who dabble in flipping homes may vie against Wall Street-financed teams that turn over hundreds or even thousands of distressed properties in short periods.
Wall Street-backed home flippers enjoy the advantage of scale and cash purchases, says Leinberger. That is particularly true in large housing markets, such as Las Vegas or Phoenix, that have a bounty of bank-owned residences. But persevering smaller players can succeed.
Nearly two-thirds of the flipped homes are sold to first-time home buyers who seek a modest, 1,500 square-foot starter home — three bedrooms and two baths in a residential neighborhood, for example.
When it comes to house flipping, of course, location matters greatly. Once predominantly practiced in West Coast metro areas, such as Las Vegas, Phoenix and Los Angeles, house-flipping action is not restricted to those areas.
Daren Blomquist, a RealtyTrac vice president, says, "Investing seems to move from West to East and we're seeing investors starting to move to East Coast markets."
"If you're looking to do a lot of flips, I would avoid overly crowded markets," advises Blomquist. "But if you're looking to do a flip or two a year or if you're getting into it as a hobby or to make some income, my advice is stick to the market that you know well. There almost always will be a potential property and a prime opportunity that you can jump on when it (becomes available.)"
Here are 10 best places to flip a house:
10. Seattle-Tacoma-Bellevue, Wash.
--Avg. gross profit: $58,930
--Homes flipped through mid-2012: 1,446
--Avg. home price: $306,878 (30th highest)
--Avg. days to flip: 113
Rising single-family home prices ought to stimulate the greater Seattle housing market, but real estate agents and buyers complain about inventory constraints. Even foreclosed homes, while still plentiful, are starting to be cleared off banks' ledgers.
RealtyTrac reports that in the first half of 2012, there were 7,530 foreclosure filings, down 49% from the same period last year. For now, though, home prices are rising slowly. Through the first half of 2012,the average home in Seattle sold for $306,878, an increase of about 1%, or roughly $3,000 from the second half of 2011.
9. San Jose-Sunnyvale-Santa Clara, Calif.
--Avg. gross profit: $61,758
--Homes flipped through mid-2012: 1,102
--Avg. home price: $615,071 (2nd highest)
--Avg. days to flip: 105
If it were not for bank-owned properties coming onto the market, prices — already among the highest in the nation— probably would be even higher, due to a lack of single-family home inventory. According to Trulia, in San Jose, there are 1,225 resale and new homes on the market, which pales in comparison to 3,661 homes in the various stages of the foreclosure process.
Through June 2012, the average sale price for a foreclosed property in San Jose was $393,156. While expensive, this was still a 42.4% discount from the average price of $682,021 for a non-foreclosed home in the area.
8. Richmond, Va.
--Avg. gross profit: $65,092
--Homes flipped through mid-2012: 385
--Avg. home price: $196,319 (116th highest)
--Avg. days to flip: 109
In Richmond, a well-known hub of current or former defense industry workers, the housing recovery has been slow to take hold. The number of housing sales has dropped nearly 25% since the same time last year, according to Trulia.
Richmond's average sales price has dropped by $7,936, compared to last year. The number of bank-owned foreclosed properties has stayed fairly constant on a year-over-year basis.
7. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
--Avg. gross profit: $69,212
--Homes flipped through mid-2012: 819
--Avg. home price: $213,156 (92nd highest)
--Avg. days to flip: 110
It is small wonder that with high resale prices, coupled by an ample supply of bank-owned properties, the home flipping business is picking up steam in the greater Philadelphia market. There were 15,256 foreclosure filings in Philadelphia during the first half of 2012, up almost 30% from the second half of 2011. Sales of foreclosed properties followed, rising almost 25% from the second half of 2011.
6. Raleigh, N.C.
--Avg. gross profit: $69,253
--Homes flipped through mid-2012: 455
--Avg. home price: $223,359 (78th highest)
--Avg. days to flip: 114
The greater Raleigh area has seen a 63% increase in the number of flipped home sales for the first half of 2012,compared to the first half of 2011, while the available inventory of foreclosed homes has remained constant.
And yet, in Raleigh, which is North Carolina's second-largest housing market after Charlotte, median home prices declined by only 8.2% from pre-recession peak value. The U.S. median home price fell by more than 33% during the recession.
5. Omaha-Council Bluffs, Neb.-Iowa
--Avg. gross profit: $71,384
--Homes flipped through mid-2012: 253
--Avg. home price: $196,325 (115th highest)
--Avg. days to flip: 117
In the first half of 2012, house flipping more than doubled in volume in the greater Omaha region, compared to the same period in 2011. In that time, foreclosed housing inventory rose by nearly one-third. These flipped homes may be slowing a broader recovery in the local housing market because home prices have decreased by 20% on a year-over-year basis, according to Trulia data.
4. Washington-Arlington-Alexandria, D.C., Va., Md., W. Va.
--Avg. gross profit: $72,297
--Homes flipped through mid-2012: 1,925
--Avg. home price: $370,919 (20th highest)
--Avg. days to flip: 110
Conditions are right for a boom year for house flippers in the Washington, D.C., area. First, there's a decline in the available stock of foreclosed properties in the greater Washington, D.C., housing market, according to RealtyTrac data, which has strained the inventory of single-family homes for sale. Demand is rising for homes in the area, and sales volume is up by more than 22% compared to last year, according to Trulia.
3. Oxnard-Thousand Oaks-Ventura, Calif.
--Avg. gross profit: $78,106
--Homes flipped through mid-2012: 535
--Avg. home price: $416,790 (14th highest)
--Avg. days to flip: 112
In an area where one in every 62 homes is in foreclosure, news of a decrease in the supply of foreclosure filings must seem like welcome news to the local housing market. Still, the greater Ventura area is highly appealing to house flippers because the heavily discounted properties are sold quickly for significant gross profits, according to RealtyTrac data.
The housing market of Ventura's metropolitan region, the Oxnard-Thousand Oaks-Ventura metro area, was one of the biggest decliners in the country, falling by 43.6% from its peak in the first quarter of 2006. The median home price in the area fell by 43.6%.
2. Lake Havasu City-Kingman, Ariz.
--Avg. gross profit: $87,513
--Homes flipped through mid-2012: 219
--Avg. home price: $114,578 (216th lowest)
--Avg. days to flip: 99
Lake Havasu may not be a nationally renowned house-flipping mecca, but gross profits reported this year may soon burnish its reputation. The party will not last as long as its neighboring area of Phoenix, which has a substantially larger inventory of foreclosed properties.
Foreclosure filing decreased by 37% in the first half of 2012,compared to the same period in 2011. Foreclosed property buyers in Lake Havasu paid an average price of $108,078 in the first six months of 2012 — when the average foreclosed property was flipped for a profit of $87,513.
1. New York-Northern New Jersey-Long Island, N.Y., N.J., Pa.
--Avg. gross profit: $118,376
--Homes flipped through mid-2012: 949
--Avg. home price: $441,910 (13th highest)
--Avg. days to flip: 118
The New York area is the largest housing market in the .S., with more than 7.5 million housing units and nearly 18.9 million residents. And true to its big league reputation, there is no more profitable place for house flippers to turn around distressed properties, according to RealtyTrac data.
But the available supply of foreclosed homes is slowly waning, off 14% in the first half of 2012 compared to the prior year. This has limited foreclosure sales, which fell 23.7% year-over-year. In the first six months of this year, the average foreclosed home sold at a discount of 39.4% to the average non-foreclosed home, down from 45.1% the year before.
To calculate this list, 24/7 Wall St. used RealtyTrac's home flip data from the first six months of 2012 for the nation's top 500 metro areas. The 10 foreclosure centers, best-known cities within those metro areas that had above-average flip totals in 2012 -- where flippers are turning the highest average profits on residential home sales, were highlighted
Excluded were metro markets with fewer than 205 flips, the national average, in 2012. Included was 24/7 Wall St.'s analysis of home price change projections from Fiserv as of the first quarter of 2012. Additional home price data were collected from Trulia.com, a real estate posting website.
