Final statistics for 2016 confirm what those in the fix-flip business have been experiencing for the past couple of years – deeply discounted homes are getting harder to find, but rising sale prices continue to make flipping houses a profitable business.
ATTOM Data Solutions, through its subsidiary RealtyTrac, released data on February 2, 2017, showing the share of distressed properties sold in 2016 dropped to a nine-year low. At the same time, homeowners who sold in 2016 experienced a 21 percent gain over their purchase price, also a nine-year high.
A further look at the statistics shows both the best places to buy properties and the best places to sell, based off the distressed sales and profits.
Distressed Sales Decline
Distressed sales, defined as bank-owned sales, short sales (those that don't cover loans against the property) and foreclosure auctions to third-party buyers, accounted for only 16.2 percent of sales of single-family homes and condos in 2016. That is down from 18.8 percent in 2015 and the lowest level since 2007.
Breaking it down further:
• Bank-owned sales: 8.0 percent of all sales, down from 10.0 percent in 2015 and the lowest level since 2006.
• Short sales: 5.5 percent of all sales, down from 6.0 percent in 2015 and the lowest level since 2008.
• Foreclosure auction sales to third parties: 2.8 percent of all sales, down from 2.9 percent in 2015 and the lowest level since 2007. This figure does not include foreclosure auctions that revert back to the foreclosing lender.
The metropolitan areas that experienced the highest rates of distressed sales (where house flippers might find their best buying opportunities) were Atlantic City, 43.8%; Hagerstown-Martinsburg, Md,-W.Va., 33.2%; Rockford, Ill., 29.2%; Montgomery, Ala., 29.2%; and Baltimore, 28.0%.
Bidding on Foreclosures
One additional point in the foreclosure auction number is that the percentage of foreclosures that did sell to a third party reached a record high of 28.5 percent (the remaining 71.5 percent reverted back to the foreclosing lender). That is up from 23.5 percent in 2015 and the highest percentage since statistics were recorded beginning in 2000.
"The increased competition at the foreclosure auction is resulting in higher sales prices there, which can even result in surplus proceeds going to the distressed homeowner in some cases after other lien holders have been paid," reported Daren Blomquist, Senior Vice President at ATTOM Data Solutions.
A total of 96,438 single family homes and condos sold to third-party buyers in 2016. The metro areas with the highest number of sales were Miami, 4,954; Philadelphia, 4,043; Atlanta, 3,657; New York-Newark-Jersey City, 3,495; and Tampa, 3,163.
However, the view shifted west when looking at the metro areas with greatest percentage of third-party sales: San Jose, Calif., 59.1%; Los Angeles, 52.2%; Reno, Nev., 52.1%; Oxnard-Thousand-Oaks-Ventura, Calif., 50.3%; and Stockton, Calif., 50.2%.
Cashing in on Hot Housing Market
The average home price gain for all sellers in 2016 climbed to $38,206, translating to 21 percent. That number jumped significantly from 13 percent in 2015.
Again, the West Coast dominated this category with the top metropolitan percentage gains in San Francisco, 69%; San Jose, Calif., 69%; Santa Rosa, Calif., 52%; Los Angeles, 49%; and Seattle, 48%.
Median Home Prices Rise
The median home price continued its upward march from the recession, climbing 6.8 percent in 2016 to $218,175, only 0.4 percent below the pre-recession median price of $219,000 of 2006. The median price has climbed 45 percent from the low of $150,511 in 2011.
Twenty-seven metropolitan areas experiencing double-digit gains in the median price in 2016, including Tampa-St. Petersburg, Fla., 14.0%; Denver, 11.3%; Portland, Ore., 12.1%; Orlando, 10.1%; and Jacksonville, Fla., 12.9%.
Metro counties with the highest median prices were New York County (Manhattan), $1,400,000; San Francisco County, $1,175,000; San Mateo County, Calif., $1,075,000; Marin County, Calif., $950,000; and Santa Clara County, Calif., $860,000.
A couple of other statistics from the report that could be indicative of the house flipping market are:
• 2.8 percent of sales went to institutional buyers (those who bought 10 or more properties during the year). This was up from 2.7 percent in 2017 but well below the post-recession high of 7.8 percent in 2012. The highest metro percentages were Columbus, Ga.-Ala., 11.6%; Birmingham, Ala., 10.0%; Memphis, 9.9%; Montgomery, Ala., 9.6%; and Binghamton, N.Y., 9.1%.
• 28.3 percent of sales were to all-cash buyers, down from 31.5 percent in 2015 and another nine-year low. The highest share of all-cash sales in metro areas were Binghamton, N.Y., 69.4%; Buffalo, 63.6%; Syracuse, 58.4%; Macon, Ga., 52.5%; and Montgomery, Ala., 52.5%.
While these numbers show the challenge of finding affordable homes to flip, the rising sale prices continue to offer an opportunity for flippers to make significant profit. Contact us for more information about how you can leverage those rising prices to purchase your fix and flip homes.
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