10. Seattle-Tacoma-Bellevue, Wash.
> Return on investment: 48%
> Avg. gross profit: $97,388 (22nd highest)
> Flipped price: $300,454 (23rd highest)
> Number of flips: 317
> Flips, pct. of home sales: 4.2% (37th lowest)
Home flippers most likely found bargains in the Seattle metro area, as 2.6% of homes sold in the area in February 2014 were sold at in a foreclosure auction, among the highest rate in the country. In addition, 6.2% of home owners sold their houses in a short sale in February — selling their homes for less money than what they owed on it — also among the higher rates in the country. Perhaps making the area even more attractive for flippers is the fact that the value of homes in the Seattle metro has gone down in the past five years. The composite value of homes in the area has decreased by 1.2% over the past five years, among the larger decreases in the U.S., according to the FHFA’s Home Price Index.
9. Detroit-Warren-Livonia, Mich.
> Return on investment: 48%
> Avg. gross profit: $32,733 (25th lowest)
> Flipped price: $100,734 (8th lowest)
> Number of flips: 368
> Flips, pct. of home sales: 3.2% (18th lowest)
The Detroit metro area was one of the hardest hit by the housing crisis in 2008. House flippers swooned into the area in the fourth quarter of 2012, raising the percent of home sales due to flipping to 13.6%, well above the nationwide rate of 7.1%. That percentage has since fallen to 3.2% in the first quarter of this year, slightly below the nationwide rate of 3.7%. Home flippers can still find bargains in the area. Short sales accounted for 12% of the homes sold in the Detroit area in February, while lender-owned homes accounted for 23% of home sales. Both percentages were among the highest in the nation. Homes sold in lender-owned and short transactions often sell for less than the outstanding amount of the loan, potentially giving buyers access to attractively priced properties.
8. Memphis, Tenn., Miss.-Ark.
> Return on investment: 51%
> Avg. gross profit: $35,651 (28th lowest)
> Flipped price: $105,176 (12th lowest)
> Number of flips: 156
> Flips, pct. of home sales: 5.0% (48th lowest)
Home flipping tends to be more profitable in economically distressed areas, which may partly explain its popularity in the Memphis area. The area’s unemployment rate was 8.2% in March 2014, well above the national rate of 6.8%. Unlike most cities where home flipping is lucrative, property values in the Memphis area have increased from a year ago. Prices, however, are still relatively low. Flipped homes were purchased for an initial price of $69,524 on average last quarter, up from slightly more than $60,000 in the same period last year. Despite the increase, the return on investment from flipping rose 11 percentage points, to 51%. Low prices in the region likely made it easier for flippers to pay in cash. More than 50% of sales were paid in cash this past February
7. Allentown-Bethlehem-Easton, Pa.-N.J.
> Return on investment: 55%
> Avg. gross profit: $54,543 (50th lowest)
> Flipped price: $153,705 (30th lowest)
> Number of flips: 53
> Flips, pct. of home sales: 3.6% (25th lowest)
A typical distressed home in the Allentown area was sold at a price 74.3% higher than a year ago as of March, a larger increase than the vast majority of other housing markets. Still, distressed homes were discounted 48.4%, one of the largest such discounts in the nation. Such low discounts may be perceived as opportunities for flippers. Despite some of the nation’s largest distressed discounts as well as one of the highest average returns for home flippers, it does not appear that flippers were especially active in the area. As of the first quarter, flips accounted for just 3.6% of sales — about in line with the U.S. overall.
6. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
> Return on investment: 56%
> Avg. gross profit: $92,680 (24th highest)
> Flipped price: $258,364 (32nd highest)
> Number of flips: 122
> Flips, pct. of home sales: 2.0% (7th lowest)
The percent of houses flipped in the Philadelphia metro area was among the lowest in the nation in the first quarter. High home values may be the reason flippers shy away from the market — despite the previous high returns. In March, buyers paid a median price of $175,000 for a non-distressed home, and $80,000 for a distressed home, both exceptionally high among the most lucrative home flipping markets. House flippers who were able to afford homes in the area earned lucrative profits. The average dollar return of a flipped home in the first quarter was $92,680, among the highest in the country. In February, 7.7% of homes sales in the area were short sales, greater than the majority of areas in the U.S. Short sales may be attractive to home flippers because the homes are often sold at a favorable price for the buyer.