Real estate flipping declines in California

Report cites fewer opportunities for fast money.
Inman News
The "flipping" of homes in California declined to its lowest level in more than three years, according to HomeSmartReports.com, a company that offers information on real estate sales trends and property values.

Investors are apparently pulling back, and "chances for a quick turnaround and profit are diminishing," according to a company statement.

During the second quarter, 2.4 percent of the existing homes that sold statewide had been owned for six months or less. That was down from 3.2 percent for the first three months of this year and down from 3.5 percent for last year's second quarter, according to HomeSmartReports.com.

Last quarter's activity was the lowest since first-quarter 2003, which also had 2.4 percent. The recent peak in flipping was during first-quarter 2005 at 3.8 percent, the company reported.

"Flipping activity is one of a number of risk factors we look at to see how healthy and stable a local market is, all the way down to the neighborhood level," said Mike Ela, HomeSmartReports.com president. "What we look for when it comes to flipping are the big ups and downs, which can indicate stress."

When factoring in commissions and costs, 24.7 percent of the second quarter's "flip" sales resulted in a loss for the seller, the highest percentage since 25.8 percent during first-quarter 2002, according to the report. The second quarter was up from 24.4 percent during the first quarter, and up from 14.4 percent a year ago. Of those who lost, the median loss was $30,100.

Overall, flippers sold the homes for a median $44,500 more than they paid. Profits were lower if there were improvement costs associated with the properties, the company noted.

"Flipping activity is always going on, as people identify opportunities, and they jump in if they have the money. This is not part of the core housing market, where people are putting roofs over their heads. This is a roll of the dice, and the investor may do well or not," Ela stated.

By area, flipping activity varied during the second quarter. Among the major counties, it ranged from 1.1 percent in Napa County to 4.8 percent in Kern County.