Arguably some of the most reviled characters
involved in the housing bust, home flippers are making a comeback, profiting
once again from growing strength in the nation's hobbled housing market.
In the first six months of 2012, there were
almost 100,000 property flips nationwide, according to foreclosure information
site RealtyTrac, an increase of 25 percent from 2011 and 27 percent from 2010.
Average gross profits were almost $30,000 not including rehab costs.
"What's attracting more folks to [flipping] now
is that we're seeing prices rising," says Daren Blomquist, director of
marketing communications at RealtyTrac. "It's a much more forgiving
climate for flippers to operate under."
While the primary draw to the flipping industry
might be rising home prices, there wouldn't be much opportunity if it weren't
for the clog of distressed and vacant homes across the nation, especially in
regions that suffered the most in the foreclosure crisis. Many of those homes
have "good bones," experts say, but face more serious issues (such as
mold), or lack cosmetic updates that would make a property move-in ready.
Because many would-be buyers don't seem to be
looking for an extreme fixer-upper, the availability of affordable, move-in
ready homes is tight, crimping sales figures across the nation.
"What we're seeing across the country is a
lack of general inventory--there's just not as many homes on the market, which
is driving prices up and pushing properties into multiple offer
situations," says Mike Baird, co-host of Spike TV's Flip Men and a
flipper of more than 1000 properties in the Salt Lake Valley area.
That's where flippers come in. While re-tiling a
kitchen floor or gutting a bathroom might be too big a project for the average
homebuyer, full-time flippers can turn around a complete home rehab in 106 days
on average, according to RealtyTrac.
Here's a glimpse at the most lucrative locales
for flippers:
And while flipping might have a negative
connotation in the wake of the worst housing meltdown in recent history, it's a
necessary step in clearing the nation's outsized inventory of highly distressed
properties, Blomquist says.
"This is legitimate flipping. This is people
coming in and finding a property that needs a lot of work, and putting in the
sweat equity to bring the property up to a rentable value or [in a condition]
to sell," he adds.
Baird agrees. Although he compares the activity
he's currently seeing in the flipping space to what it was during the housing
market's heyday in the early 2000s, it's not the kind of
"irresponsible" flipping that helped bring the market and economy to
its knees just a few years later.
Whereas inaccurate appraisals and unscrupulous
real estate speculators were mostly to blame for the flipping industry's bad
rap, Baird sees today's flippers making more calculated business decisions
based on current market conditions.
"People [are] thinking we're at the bottom
or near the bottom, interest rates are at an all-time low and so we're jumping
in and we're buying properties at rock bottom, fixing them up and selling
them," Baird says. "Contrast that with when things were crazy and
people were buying property to simply speculate in the short term [on] price
appreciation seen in years past."
Furthermore, Baird and Blomquist don't anticipate
the frenzied flip jobs seen in the early 2000s. Instead, flipping will be more
gradual and will follow local housing market recoveries.
"I think it will spread--investors are
flipping a lot in Phoenix right now, but they're moving to different
markets," Blomquist says. "Flipping is a long-term phenomenon. If
investors run out of prospective properties in one market, they move on."
Meg Handley is a reporter for U.S.
News & World Report. You can reach her at mhandley@usnews.com and follow
her on Twitter at @mmhandley.
