In its 2015 Q4 Home Flipping Report, RealtyTrac found New York City as the third-highest grossing metro in the nation, with $120,000 average profit from home flips in 2015. New York City was only surpassed by San Francisco and San Jose, which tied for first with $145,000 in average gross profit each.
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Nationwide, the number of active home flippers is at the highest level seen since 2007, the report says. Further, the share of homes flipped is higher than 2005 peak levels in 11 percent of markets across the country.
On the other hand, ratio of flips per investors dropped to its lowest levels since 2008, indicating a clearer market for small investors or entry-level flippers. In the U.S., there were 1.63 home flips per investor last year.
“I think the numbers indicate that fringe flippers, folks who see it on TV and think, ‘I think I can do this,’ jumped on the band wagon in 2015,” said RealtyTrac Vice President Daren Blomquist.
Manhattan: A better buy for the flipping pros?
New York County, also known as Manhattan, had 41 home flips in 2015 with a median purchase price of $1,175,000. The flipped sale price within 12 months was $1,390,000, netting a median profit of $215,000 in just a year.
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“To buy a flip, the average purchase price for properties in Manhattan was $1.2 million. The average price the flippers sold for was $1.4 million. That is a huge barrier of entry,” Blomquist said. “However, if you go out to Long Island, the median price is only $185,000. That’s certainly much more palatable for an entry-level flipper.”
Brooklyn: better ROI, accessible purchase prices
In Kings County, the 2015 gross return on investment (ROI) was 91.5 percent– an 89 percent increase year-over-year. Compared to Manhattan, with a 46 percent drop in ROI, Brooklyn shined in the category returns last year.
Additionally, Brooklyn’s median purchase price on home flips was $235,000, and flipped median sales reached $450,000, providing the exact gross profit as Manhattan at $215,000 — but at a much lower entry price point. Brooklyn is a diverse community, so it’s likely flippers in the borough targeted less expensive neighborhoods with distressed properties.
“In a market like New York, within the metro area, there are pockets that are probably much more palatable for entry level flipper. It’s a tough market to get into. It’s high-risk, high-reward,” Blomquist said.
When flipping turns negative for a market
Flipping typically indicates strong confidence in a home buying market, and this year’s report exhibited most buyers are paying in cash, which is positive for critics concerned with foreclosures on failed flips.
“That’s a good sign when we talk about if this [housing market] is another bubble. To put it in perspective, if we go back to 2007, which was the peak in flipping, only 34 percent of properties were paid in all cash. Now, 70 percent are buying with cash, and that tells me there’s less risk that they will fall into foreclosure if they make a bad decision on the flip,” Blomquist explained.
In the NYC metro, specifically, 77 percent of the flips completed in 2015 were purchased in all-cash, which is higher than the national average.
But what happens when flips oversaturate the market and inflate sales prices too quickly? It’s all about balance, according to Blomquist, who says that home flipping is good in moderation, although it’s tough to define a threshold.
“2005 was high water: Nationwide, over 9 percent of homes that were selling were flips, and in many markets, 15 to 20 percent were flips. When you start seeing that level– in the 10 percent range — the market is being dominated by very quick sales that can be pushing prices faster than they should be based on market fundamentals,” he said.
