The housing recovery is turning out to be especially profitable for home flippers—who are pocketing returns as high as 80 percent in some markets.
But buying fixer-uppers is not a sure bet. With gains in home prices slowing, so is the pace of home flipping. That's left flippers in some states selling off properties with low single digit returns, according to the latest data provided by RealtyTrac.
There is still a lot of money to be made. Although the share of overall home sales from flipped homes has fallen, the average profit has edged higher—to about $60,000 per flipped house. But today's flippers are in a very different market than the boom years a decade ago when the star flippers on reality TV shows ran up huge profits with very little risk.
"The formula was just buy a house and let appreciation do the rest," said RealtyTrac vice president Daren Bloomquist. "That's not a viable strategy for the long term."
When the housing bubble burst in 2006, many of the flippers of that era were stuck with overvalued homes they couldn't sell and landed in foreclosure with five million other American homeowners. The reality TV shows were soon cancelled.
But the housing recovery in 2011 brought a return of the home flippers, typically small operations that buy and rehab a handful of properties at a time. Many of them turned to the large stock of foreclosed homes, including the large stock of abandoned or poorly maintained properties that the foreclosure crisis left in its wake.
That wave of flipping peaked at the end of 2012, according to RealtyTrac data, when roughly 7 percent of homes sold nationwide had been flipped. But as the rise in home prices has slowed, so has the pace of flipping. As of the first quarter of this year, the share of flipped homes had fallen to 3.7 percent, according to RealtyTrac.