Darren Blomquist, Vice President, Realytrac
BY IAN MYLCHREEST -- The national home market is now facing a perfect storm for house flipping, says Realtytrac Vice President Darren Blomquist. “Basically, the market, because it’s a free market, tends to over-compensate and over-correct, so what we saw as a result of the housing crisis is that home prices over-corrected downwards and so we saw a lot of markets where home prices were low relative to where they should have been.”
Foreclosures and so-called “distressed sales” alike short sales tended to pull down home values, so over the last couple of years a lot of bargains have been available.
This flipping pattern played out in 2012, according to Blomquist, which explains why there was less flipping in the first half of 2013. That’s the finding of Realtytrac’s biannual house flipping report. Las Vegas is no longer in the top 15 markets for home flipping. In fact, investor and homebuyers in Nevada flipped only 2,932 homes in the first six months of 2013, a 34 percent decline from the first half of 2012.
Much of the flipping was driven by investors who were willing to take their profits when houses rose sharply in 2012 in Las Vegas. Before that they had held onto properties rather than take losses.
The average Las Vegas flipper makes about 9 percent gross profit, said Blomquist. The costs of rehabilitating homes and that margin mean that flippers are less willing to take lower profits. Returns in other markets in the West are as much as 25 percent.