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Home-flipping activity, returns slow in Q3

Home-flipping activity, returns slow in Q3

By Ron Trujillo / ron@calhomenews.com

The home-flipping craze, accelerated by do-it-yourself programs on HGTV and DYI cable networks, is slowing down nationwide – and many regions in California.

Home-flipping – defined by the purchase-renovation-sell of a home during a one-year period declined in 49 of the 93 major markets nationwide, including a 6% decline in Los Angeles and 2% dip in San Francisco, according to ATTOM Data Solutions.

The critical housing shortage that has caused fast-rising home prices in part of the state, has also affected the home-flipping market.

In Southern California, “investors are finding home flips for investment purchases to be a challenge due to an aging housing inventory requiring a greater repair cost coupled with higher acquisition costs due to low available inventory,” Michael Mahon, president of First Team Real Estate, says in a blog for ATTOM. “That equates to increased risk for return on investment that is keeping many potential investors on the sidelines.”

For example, the average flipped home in Los Angeles was built in 1959 and nets a 33.1% return on investment, much lower than the national ROI of 47.7%. Riverside-San Bernardino (The Inland Empire) flips had slightly better returns of 37.7%, while Thousand Oaks-Ventura-Oxnard netted a gross return of 29%.

The Bay Area also boasted below the national average returns on investment – 38% in San Francisco-Oakland and 25% in Silicon Valley.

So where are the best home-flipping returns? The Central Valley cities of Fresno and Bakersfield at 61% and 47%, respectively. More available homes and lower prices are helping investors in those markets.

Flipping facts, figures

Fresno

Percent of overall sales: 7.8%
Percent of flips purchased with cash: 71.2%
Gross return on investment: 60.8%

Los Angeles

Percent of overall sales: 5.9%
Percent of flips purchased with cash: 59.3%
Gross return on investment: 33.1%

Sacramento
Percent of overall sales: 5.9%
Percent of flips purchased with cash: 63.7%
Gross return on investment: 35.7%

San Diego

Percent of overall sales: 5.2%
Percent of flips purchased with cash: 51.5%
Gross return on investment: 30%

San Francisco

Percent of overall sales: 3.8%
Percent of flips purchased with cash: 54.0%
Gross return on investment: 38.0%

Photo by Romolo Tavani/Shutterstock.

 

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