House flipping in the D.C. area is hot again, according to RealtyTrac's Midyear 2013 Home Flipping report released last week.
According to the data, house flipping — the practice of purchasing, renovating and reselling a home within six months — increased in more than two-thirds of the housing markets during the first half of 2013, up 19 percent from a year ago and up 74 percent from the first half of 2011. Those markets include New York, Chicago and Washington, D.C.
The D.C. metro area saw a 108 percent increase in home flipping activity compared to the same time last year, and ranked 12th among the top 15 for most profitable areas to flip.
An increase in distressed inventory and rising home prices are what's spurring house flipping in the District, says Daren Blomquist, vice president of RealtyTrac. He says we're seeing house flipping exceed what we saw during the height of the housing bubble.
During the first half 2013, investors flipped 3,169 single-family homes in the D.C. metro region, with an average purchasing price of $408,441. The average gross profit was $46,205. It's worth noting, however, that the data does not take into account the costs of renovation for the properties.
Maryland and Virginia saw a rise in flipping activity as well, with a 104 percent increase in Maryland, and 135 percent increase in the Commonwealth.
Those hoping to jump in on the home flipping action may not have much time left though. Blomquist predicts the trend to be short-lived.
"This type of higher level of flipping is not healthy for an extended period of time," he says. "I see it as a good thing right now to help the market convert from a distressed market into a more healthy market. But I would expect the numbers to go back down, probably next year. It's a pretty short-term phenomenon, and we're already seeing this in other markets where the recovery happened a little bit sooner."
Out of the 100 markets analyzed for the report, 32 had declining flipping numbers, including Las Vegas, Phoenix, Southern California, and Atlanta — areas that were once hot spots for flipping.
While the recent rise in mortgage rates likely didn't affect the report's data, which covered through the end of June, Blomquist expects it to have an impact on flipping in the near future.
"It's a key component to the overall real estate market," he says. "It's going to affect flipping, not from the perspective of the flippers purchasing the property... but to an owner-occupant, who can no longer afford as much because of the higher interest rate. It's going to change the way they can market to those owner-occupants. They may not be able to list those properties for as high as they would even just a few weeks ago."
For prospective homeowners, the rise in flipping can be an advantage or a burden, depending on what they're looking for. Those looking for a bargain property and willing to do some work will likely run into competition from flippers who may be buying with cash and able to purchase at a higher price. But those searching for newly renovated properties may discover more options on the market.
"Flippers are taking some of that distressed inventory and getting it in good condition, so those types of buyers can just snatch up the properties and move in right away," says Blomquist.
But of course, the luxury of a move-in ready home will undoubtedly come at a higher price.