It seems that in the worlds of fashion and design, celebrities are always at the forefront of the newest, most exciting trends of the season. With money and beauty comes power and influence, giving many of Hollywood’s celebrities the edge on the latest trends. One trend that celebrities have jumped ahead in is that of high-end home flipping. In the last few years celebrities such as Jennifer Aniston and Ellen Degeneres have gotten into the home flipping game, paving the way for the masses throughout Southern California and across the nation.
Defined as the buying and selling of a home in a short increment of time for the sole purpose of making money, home flipping can be an extremely risky business, especially given the state of the national housing market. Under the current conditions of the national housing market, rising home prices are leaving a very small margin for standard home flippers. However, on the high-end of the spectrum, where home sales trends rarely echo what is going on at the traditional level, flipping activity is amping up.
“Home flipping is settling back into a more historically normal pattern after a flurry of flipping during the recent run-up in home prices in 2012 and 2013,” said Daren Blomquist, vice president at RealtyTrac, to CNBC. “Flippers no longer have the luxury of 20 to 30 percent annual price gains to pad their profits. As the market softens, successful flippers will need to focus on finding properties that they can buy at a discount and efficiently add value to.”
San Diego, Los Angeles Markets Garner Big Profits for Flippers
Overall flipping is down throughout the country. RealtyTrac reports home flippers represented 4.6 percent of all U.S. single-family home sales in the second quarter of 2014. This is down from 5.9 percent in the first quarter and down 6.2 percent from the second quarter of 2013. On the traditional level the gross profit earned from the average home flip is down as well, falling from 31 percent to 21 percent over the course of one year.
Such is not the case on the higher end of the home price spectrum, however. Home flips with a sale price of $750,000 or more rose by 21 percent in the last year. These homes also showed a higher rate of return, as homes priced between $750,000 to $1 million had a 41 percent return rate, giving flippers more fuel to frequent the higher price brackets.
California was found to have the most profitable metropolitan areas for home flipping, with the southern cities leading the way for the state, according to RealtyTrac. Los Angeles and San Diego, in addition to the more northerly San Jose, reported an average gross profit of more than $100,000 per flip.
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