Archive for August, 2014
By Alexander E.M. Hess, Michael B. Sauter and Thomas C. Frohlich
10. Sacramento–Arden-Arcade–Roseville, Calif.
> Pct. distressed sales: 25.4%
> Unemployment rate: 8.2%
> Pct. change in home prices: 22%
More than one-quarter of Sacramento area homes sold in December were distressed, versus slightly more than 16% nationwide. Additionally, 18.6% of home sales were foreclosure-related, meaning they involved either a bank-owned property or a sale at a foreclosure auction. This was among the highest rates in the country for a major metropolitan area. Foreclosure-related properties were sold at a 22% discount over other properties sold that month, lower than the 38% discount for such homes nationwide.
9. Chicago-Naperville-Joliet, Ill.-Ind.-Wis.
> Pct. distressed sales: 26.9%
> Unemployment rate: 8.7%
> Pct. change in home prices: N/A
Chicago is one of the largest housing markets in the country, with an annualized total of than 170,000 homes sales as of December, according to RealtyTrac. Of area sales in December, more than a quarter were short-sales or foreclosure-related. One reason the city may have so many distressed homes is its long-term struggle with high unemployment. The metro area’s November unemployment rate was 8.7%, sixth highest of any major city measured. Perhaps showing early signs of recovery, foreclosure starts in Cook County, the metro area’s most populous county, fell by more than 40% in 2013.
8. Cleveland-Elyria-Mentor, Ohio
> Pct. distressed sales: 28.6%
> Unemployment rate: 7.3%
> Pct. change in home prices: 12%
Foreclosure-related sales accounted for 21.7% of all home sales in the Cleveland area in December, more than any metro area considered except for Las Vegas. However, institutional investors — who often buy homes that have been foreclosed — do not appear to be targeting distressed properties in and around Cleveland. Institutional sales accounted for just 4.5% of all homes sold at the end of last year, lower than in many other metro areas considered and below the national percentage of such sales. While this suggests individuals and families account for most home buyers, it may also indicate investors’ lack of interest in the local economy. Incomes in the metro area are fairly low as well. The Cleveland area’s median household income was just $46,944 in 2012, versus more than $51,000 nationwide.
7. Riverside-San Bernardino-Ontario, Calif.
> Pct. distressed sales: 28.8%
> Unemployment rate: 9.6%
> Pct. change in home prices: 23%
While the housing crisis may be in the rear view mirror for much of the country, the housing market in the Riverside metro area continues to process its effects. Foreclosure-related accounted for more than 21% of all homes sold in the area at the end of last year. Additionally, many area residents were unemployed. The area’s unemployment rate was 9.6% as of November, higher than any other major metro area. However, not all news for the area has been bad. Riverside area homes had a median sales price of $232,000 in December, well above the U.S. median of $168,391. Additionally, sales prices were up 23% compared to the year before, one of the largest increases among major metro areas.
6. Memphis, Tenn.-Miss.-Ark.
> Pct. distressed sales: 29.5%
> Unemployment rate: 9.5%
> Pct. change in home prices: N/A
Nearly 30% of home sales December in the Memphis metro area were either short sales or foreclosure-related sales. While according to figures released by the Federal Reserve in its Beige Book both home sales and housing permits had risen considerably in 2013, part of this activity may be investor speculation rather than families buying a home. At the end of last year, institutional investors accounted for nearly 18% of sales in Memphis, fifth-most among metro areas considered. The city continues to struggle with unemployment, with a jobless rate of 9.5% as of November and relatively sparse job growth.
5. Miami-Fort Lauderdale-Pompano Beach, Fla.
> Pct. distressed sales: 29.6%
> Unemployment rate: 6.8%
> Pct. change in home prices: 25%
In the Miami metro area, all-cash sales accounted for more than 64% of home sales in December 2013, more than any MSA reviewed by RealtyTrac except for Jacksonville. By contrast, 42.1% of U.S. residential sales in December were all-cash purchases. Often, all-cash purchases are made by international investors and wealthy retirees rather than local families. It may be that locals are unable to compete with all-cash home buyers. As of 2012, income disparities in the Miami area were among the largest in the U.S.
4. Tampa-St. Petersburg-Clearwater, Fla.
> Pct. distressed sales: 30.1%
> Unemployment rate: 6.3%
> Pct. change in home prices: 14%
More than 30% of Tampa area home sales were distressed sales as of December. Despite the high level of distressed sales in the metro area, the Tampa Bay region has seen a rise in conventional home sales. The median home sales price that month was $112,000, less than most metro areas considered. Perhaps as a result, more than 57% of the Tampa Bay area’s real estate deals were cash sales in December of last year. Also contributing to a high number of cash sales, a relatively large portion of homes were sold at foreclosure auctions. According to Blomquist, buyers at such auctions must often pay cash.
3. Detroit-Warren-Livonia, Mich.
> Pct. distressed sales: 31.2%
> Unemployment rate: 9.3%
> Pct. change in home prices: 33%
The median sales price of a home in the Detroit metro area jumped by 33% between December 2012 and December 2013, more than any other city considered. Despite the jump, prices remained quite low, with a median home price of just $93,010 at the end of last year. Many of the cheapest homes on the market were likely either bank-owned properties or sold at foreclosure auctions. These homes were sold at a 72% discount from normal homes and accounted for 21.3% of all sales — in both cases more than in all but two other metro areas. The mortgage crisis hit Detroit’s housing market hard, and while the housing market has recovered somewhat, the city of Detroit recently entered into bankruptcy after years of accumulating debt while losing residents.
2. Orlando-Kissimmee, Fla.
> Pct. distressed sales: 35.9%
> Unemployment rate: 5.9%
> Pct. change in home prices: 19%
Nearly one in five home sales in the Orlando area was a short sale in December of last year, meaning it sold below the value of the mortgage on the property. In addition to this, another 16% of homes sold were foreclosure-related, making Orlando the second most popular metro area for distressed sales. Many regions in Florida, including Orlando, were hit hard by falling prices during the housing crisis. The situation has improved somewhat, but last month 57% of sales were all-cash, implying families have still not fully returned to the market.
1. Las Vegas-Paradise, Nev.
> Pct. distressed sales: 41.0%
> Unemployment rate: 9.2%
> Pct. change in home prices: 25%
Of all home sales in Las Vegas 41% were foreclosure auction sales and distressed sales, by far the highest in the country. The median sales price in the Las Vegas metro area was just $159,000 in December, below the nationwide median of $168,391 despite rising 25% from the year before. By several measures, the Las Vegas housing market is trending in the positive direction, as is the area economy as a whole. Speaking to the Las Vegas Review Journal, Brookings Institution’s Mark Muro noted, “There’s some normalization of the real estate market, and that’s a broad background benefit for the overall economy.” But as of November the area’s jobless rate remained above 9%, versus just 7% unemployment nationally.
World News US
By Alexander E.M. Hess and Thomas C. Frohlich
10. Vallejo-Fairfield, Calif.
> Avg. gross profit: $92,538
> Flipped price: $304,346 (14th highest)
> Number of flips: 75
> Change in flips Q2 to Q3: -34%
People who flipped homes in Vallejo in the third quarter of 2013 bought their property for just under $218,000 on average. This was roughly in line with the national average for these purchases. But those sellers received more than $304,000, one of the highest average flip prices in the nation. A flip in Vallejo returned more than $92,000 last quarter, higher than in most markets. Despite their profitability, home flips in Vallejo during the third quarter actually fell by 34% from the previous quarter and by more than 50% from the same quarter of the previous year.
9. Seattle-Tacoma-Bellevue, Wash.
> Avg. gross profit: $97,002
> Flipped price: $319,280 (13th highest)
> Number of flips: 485
> Change in flips Q2 to Q3: -32%
Home prices in Seattle have been rising since early 2012, according to the S&P/Case-Shiller Home Price Index. At the same time, home flips rose considerably, peaking at 711 in the second quarter of 2013. However, in the third quarter, flipping activity declined by nearly a third compared to the previous quarter. Home flipping remained profitable with an average gross profit of $97,002 per home. One reason for the lower activity may be tight real estate market in the area, which reduced the number of opportunities to buy homes to flip. Bloomquist expects inventory to rise.
8. Salinas, Calif.
> Avg. gross profit: $100,228
> Flipped price: $438,333 (7th highest)
> Number of flips: 69
> Change in flips Q2 to Q3: -10%
Salinas, a major agricultural producer, is located in the central coastal region of California. Compared with other housing markets where home flipping is profitable, the number of flips has been relatively low in the past few years. Just 69 homes were flipped in the most recent quarter. Average gross profits from home flipping increased by more than $40,000 when compared with the same quarter last year.
7. Santa Rosa-Petaluma, Calif.
> Avg. gross profit: $113,001
> Flipped price: $411,909 (9th highest)
> Number of flips: 125
> Change in flips Q2 to Q3: -18%
The Santa Rosa-Petaluma area makes up Sonoma County, a major part of California’s Wine Country. Since the start of 2012, home flipping activity has increased, peaking at the end of last year with 197 homes flipped in the fourth quarter. However, activity has declined as of the third quarter of this year. The area remains expensive. While the average purchase price for a home that was later flipped was quite high — nearly $300,000 — the same homes were sold for nearly $412,000 on average, higher than all but eight other cities.
6. San Diego-Carlsbad-San Marcos, Calif.
> Avg. gross profit: $120,180
> Flipped price: $475,306 (5th highest)
> Number of flips: 900
> Change in flips Q2 to Q3: -22%
In recent years, home flipping activity in San Diego has surged. In the first quarter of 2011, just 285 homes were flipped. At its peak, in the second quarter of this year, flips totaled 1,160. But higher prices and higher mortgage rates have removed some of the appeal for buyers in general, according to the San Diego Union-Tribune. Coupled with a decline in the number of available distressed properties, home flipping also may have become less appealing. The number of flipped homes dropped by 22% from the second to the third quarter of 2013. Flipping was still profitable last quarter. The average gross profit on flipped homes was more than $120,000, up from fewer than $89,000 last year.
World News US
By Thomas C. Frohlich and Michael B. Sauter
In 2013, investors bought more than 156,000 homes, only to fix them up and quickly resell them for an average profit of $58,081. Home flipping became increasingly popular as the housing market began to recover. However, While the number of U.S. home flips increased in 2013 compared to 2012, home flips as a proportion of all home sales declined from 7.1% of sales in the fourth quarter of 2012 to just 3.8% of sales in the fourth quarter of 2013.
Daren Blomquist, vice president at home data site Real Trac, explained, “We saw this surge in flipping that corresponded with the market bouncing off the bottom. And now that home prices are beginning to moderate, flippers are beginning to pull back on their activity. I think another thing causing flippers to pull back is there’s not as much inventory available, particularly distressed inventory at a discounted price.”
Where homes are available, however, substantial profits can still be made. In six states, home flippers made an average profit of considerably more than $80,000 in 2013. In Massachusetts, the gross profit on a flipped home was more than $100,000. 24/7 Wall St. examined the six states where home flipping was most lucrative in 2013.
Buying homes to flip when market prices are relatively high may mean more overhead, but the fact remains that the states and metro areas with the largest average profits on home flips were the more expensive housing markets. All of the six most profitable states to flip a home in 2013 had among the highest average purchase prices that year. For example, California homes intended to be fixed up and resold for a profit cost an average of $284,650, nearly $100,000 more than similar houses across the U.S. Of course, they were then resold for an average price of $381,221. “High prices result in higher profits,” confirmed Blomquist. “These states are basically the highest-priced markets in the country.”
Two of the markets on this list, New York and New Jersey, may be lucrative and popular because a large number of properties became available to flip when the region was struck by superstorm Sandy in October, 2012. Notably, the second-most lucrative housing market to flip last year was Ocean City, New Jersey, where several hundred homes were flipped for an average profit of more than $158,000. “I would suspect Sandy had some impact.”
Blomquist added. “We saw a big increase in foreclosure activity in these areas, and some of that is related to properties homeowners were walking away from. Those homes are prime candidates for flippers. They probably have some damage that other buyers would shy away from, but a flipper would be willing to take on.”
24/7 Wall St. examined the six states with an average gross home flip profit of at least $80,000 in 2013, based on data from RealtyTrac. RealtyTrac also provided average flip price, average gross profit, and the proportion of all home sales that were flips for 2011 and 2012, and Q4 2013 for States and U.S. Metro areas. We also reviewed RealtyTrac’s foreclosure rates for 2013.
These are the six best states to flip a house.
> 2013 avg. gross profit: $89,525
> Average purchase price: $190,983 (10th highest)
> Pct. of all home sales: 3.4% (24th fewest)
> Foreclosure rate: 1 in 84 (11th highest)
Investors flipped 2,828 homes in Washington last year. The average home purchased in the state for the purpose of flipping was bought for $190,983 and sold for $277,022. The average gross profit of nearly $90,000 represents a 46.9% return on investment, considerably more than the national gross profit of just $58,081 and an average return of just 30.7%. Home flipping in Seattle delivered especially high profits of more than $100,000 on average, 14th-highest of any U.S. metro area. The state’s higher than average foreclosure rate in 2013 likely attracted home flippers because foreclosed homes make ideal homes for flipping. In 2013, one out of every 84 homes were in foreclosure in the state, the 11th-highest rate in the country.
5. New York
> 2013 avg. gross profit: $91,970
> Average purchase price: $204,479 (7th highest)
> Pct. of all home sales: 10.7% (2nd most)
> Foreclosure rate: 1 in 176 (15th lowest)
About one in 10 property sales in New York were home flips last year, more than in any other state except for Nebraska. Home flippers were also able to make larger profits in New York than in most other states that year. The average gross profit was nearly $92,000. The New York City – Long Island region had more homes flipped, and at better profits in than in the rest of the state. There were 10,683 home flips in the New York City area last year, more than in any other MSA. On average, home flippers earned $118,546 in the metro area, more than double what home-flippers earned across the nation.
4. New Jersey
> 2013 avg. gross profit: $92,744
> Average purchase price: $214,858 (6th highest)
> Pct. of all home sales: 7.6% (6th most)
> Foreclosure rate: 1 in 91 (13th highest)
Home flips in New Jersey increased dramatically as a% of all home sales, from 1.9% of all sales in 2011 to 7.6% of all sales in 2013. That return on investment actually increased throughout the year. The average gross profit of more than $118,000 in the last quarter of 2013 was more than in any other state. Ocean City is a particularly lucrative home flipping market. Home flippers sold a home in Ocean City for an average of around $674,300, at a profit of more than $150,000. Across the state, flipped homes were sold for $328,404 on average, at a profit of $92,744.
> 2013 avg. gross profit: $98,122
> Average purchase price: $284,650 (2nd highest)
> Pct. of all home sales: 6.2% (13th most)
> Foreclosure rate: 1 in 64 (4th highest)
Home flipping is not only extremely lucrative in the state, but it has become more popular in recent years. In 2011, just over 1,000 homes were flipped in the state. Last year, there were 3,522. Perhaps one reason for the increase in flips in the state is the availability of recently foreclosed homes. In 2013, 1 out of 64 homes were in foreclosure in the state, the 4th highest rate in the country. Flipping also became more profitable over the course of the year. Gross profits from home flipping in Maryland the last quarter of 2012 were higher on average than any other state except for Hawaii, at more than $100,000. In some of the state’s metro areas, home flipping was even more lucrative. On average, flipped homes in the D.C. metro area were sold for $372,792 at a profit of more than $112,000 last year, more than in most other metro areas.
> 2013 avg. gross profit: $99,999
> Average purchase price:
> Pct. of all home sales: 6.0% (14th most)
> Foreclosure rate: 1 in 100 (16th highest)
For three years running, more homes were flipped in California than in any other state. Not only that, but the number has increased over the last three years from 14,490 home in 2011 to 21,152 last year. Although California trails Massachusetts in average gross profit on home flips, the state’s metro areas dominate urban home flipping markets across the nation. Of the 10 most lucrative metro areas for home flipping, seven are in California. Home flippers in San Jose, for example, made more than $160,000 on average reselling homes last year, the most of any city nationwide. Profits may be high in the state because home prices are very high. Flipped homes were more expensive than those in any other state last year, selling for more than $381,000 on average. In addition, home flippers may be drawn to California because of the state’s many foreclosed homes. One out of 100 of the state’s 37 million housing units were in foreclosure last year, which was in the top third for foreclosure rates nationwide.
> 2013 avg. gross profit: $103,384
> Average purchase price: $202,850 (8th highest)
> Pct. of all home sales: 2.3% (18th fewest)
> Foreclosure rate: 1 in 287 (9th lowest)
Home flippers sold less than 900 homes in Massachusetts last year but at a higher profit than in any other state. The average flipped home was resold for more than $300,000, and profits were more than $100,000 on average. Unlike many other states where home flipping was common, the foreclosure rate in Massachusetts was relatively low. One in every 287 homes were in foreclosure in 2013, better than most states. Home flipping in Boston has increased in recent years, perhaps due to the high likelihood of making a good profit. Home flippers in the Boston area earned $119,258 on average last year, much more than in the vast majority of metro areas. A&E even produced a second season of “Flipping Boston” last year, a show that follows the successes and failures of investors who fix and resell homes in the Boston area.
World News US