Flipping homes is getting harder in the U.S. with home prices sliding and distressed inventory coming down, according to property intelligence firm RealtyTrac
"The flippers' formula is to buy a property that they can add value to at a discount and sell at a premium," Daren Blomquist, vice president at RealtyTrac, explained in a telephone interview to Bloomberg. "Now, home-price appreciation has slowed dramatically in many of the flipping meccas and the availability of discounted distressed properties has dried up," he added.
In the second quarter of 2014, only 31,000 single-family residences were flipped nationwide that accounted for 4.6 percent of all home sales in the quarter, RealtyTrac found. The figure is down from the 5.9 percent recorded in the first quarter of 2014.
It was 6.2 percent at the same time, a year earlier.
Sellers aren't able to find the right bargains for their flipped homes. Also, the number of foreclosed homes on the market has dwindled.
In the second quarter of 2014, home prices of existing single-family homes went up in 122 of the total 175 metro areas analyzed. Forty seven of the regions showed a decrease in prices on a year-on-year basis. The rate of price growth is about 11 percent lesser than that of the first quarter.
A recent CoreLogic report also showed that inventory of foreclosed homes went down 9.9 percent on a year-over-year basis to 49,000, marking the 32nd straight month of declines.
However, RealtyTrac found that high-end home flipping is trending now. The return on investment on flipped homes that sell in the range of $750,000 to $1 million is usually 41 percent. But in some areas, sellers are making more than the average return on investment because prices in these areas are picking up faster relatively.
Also, home flipping activity varied on a quarter-on-quarter basis.
