- A new Redfin analysis counted price gains for flipping in individual neighborhoods, and in overall metros in the 28 cities where Redfin has agents.
- Washington, DC, and LA had the best individual neighborhoods, and San Francisco had the best overall gain for a metro.
- Philadelphia, Chicago and Baltimore flippers realized the best percentage gain in price for flipping.
It’s a good time to be flipping homes, especially in a few big cities.
In a study conducted by Redfin, flips brought $102,400, on average, in sale price over the original purchase price of homes turned over. That’s better than the average of $98,500 per flip in 2014, and well above the $90,900 that flippers were getting during the last housing boom.
Overall flipping activity across the country is on the decline, likely because the housing crisis that made many homes available for flipping, is waning, or over. The analysts estimated 43,000 homes were flipped in 28 Redfin markets last year, nowhere near the peak year volume of 2005, which saw 95,000 homes flipped.
The most lucrative flipping deals were had in Washington, DC, and Los Angeles. DC had the most lucrative neighborhood for flipping – Petworth – and the San Francisco metro had the highest average gain per flip, at $216,000.
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Redfin also released a ranking of the country’s 10 hottest neighborhoods for flipping gains. The hottest neighborhoods for flips, based on average gains were: D.C.-area’s Petworth at $337,000 and Mount Washington ($312,000) and Silver Lake ($307,000), both in Los Angeles. Rounding out the top-five hottest neighborhoods were D.C.’s Brookland at $290,00 and North Sunnyvale in San Jose ($268,000).
Even with average gain on a flip in San Francisco at more than $200,000, no San Francisco neighborhoods made the top 10 neighborhood list this year. With the typical home in San Francisco priced above $1 million, the cost of entry for flippers is high.
Redfin crunched the numbers all the way back to 2001 to examine how lucrative home flipping was before and after the housing bust. Excluded were homes that were acquired and resold by banks as those tend to be foreclosed properties. Also left out were properties that cost less than $20,000, or more than $1.2 million.
Redfin defined a flip as any home (condos, townhomes, or single-family units) that was bought and resold between a three to 12-month period, for at least 10 percent more than the original purchase price.
Also of note: the average gain calculation over original price favored big, older cities on the eastern side of the country. Flippers in Philadelphia, Chicago and Baltimore realize gains of 73 percent, 70 percent and 67 percent respectively over the original purchase price.
Redfin used county recorder data from CoreLogic from January 2001 through August 2015 and sales data from the multiple listing service through December 2015. We estimated flipping activity from September through December 2015 based on the first eight months of the year and annual changes.
On the Redfin blog, Steve Centrella, an agent in Washington, D.C, said, “The golden ticket for developers in D.C. is Grandma’s house, a tired home with solid bones and well-cared-for original elements available at a low price that can be refreshed with an updated look and modern finishes.”
But Centrella warns that buying a flip can be a buyer-beware situation. “If the home is quickly flipped by a novice renovator, you really need to look out for the ‘lipstick on a pig’ situation where the home has been freshened up, but the bones, utilities and roof could be hiding all sorts of unpleasant surprises.”