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IRVINE, CA—The percentage of flipped homes nationally fell to 4.5% of all single-family sales in Q2, but average flipping returns are up, according to a report from RealtyTrac. In addition, the number of days to flip a home reached an eight-year high in Q2, but the share of flips acquired in foreclosure reached a 7.5-year low, the firm reports.

The report show that the percentage of home sales that were flips was down from 5.5% in the previous quarter and down from 4.9% a year ago. Going back to the first quarter of 2000, the peak in flipping was in the first quarter of 2006, when 8% of all single-family-home sales were flips.

Meanwhile, the average gross profit—the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping experts estimate typically run between 20% and 33% of the property's after-repair value)—for completed flips in the second quarter was $70,696, up from $67,753 in the previous quarter and up from $49,842 a year ago.

The average gross return on investment—the average gross profit as a percentage of the average original purchase price—was 35.9% for completed flips in the second quarter, up slightly from 335.6% in the first quarter and up from 23.4% a year ago. The average gross ROI on flips reached a 10-year peak of 44.9% in Q2 2013.

According to Daren Blomquist, VP of RealtyTrac, “Despite the rise in flipping returns in the second quarter, home flippers should proceed with caution in the next six to 12 months, since home-price appreciation slows and a possible interest-rate increase could shrink the pool of prospective buyers for fix-and-flip homes. While average flipping returns are up substantially from a year ago at the national level and in moderately priced markets such as Miami, Atlanta Phoenix and Minneapolis, flipping returns are softening in some of the higher-priced markets such as San Francisco, Seattle, Denver and Los Angeles.”

Blomquist adds that the fewer foreclosure deals and longer flipping timelines seen in the data “demonstrate that flippers are getting squeezed on both sides of the profit equation. Experienced flippers will often need to enter into higher-risk markets with less-solid economic fundamentals to chase better yields. Flipping is not always profitable, as evidenced by the fact that flips on low-end homes priced below $50,000 actually yielded negative returns in the second quarter.”

So what will flippers' next move be? Blomquist tells GlobeSt.com, “The smart flippers will hedge their bets and at the very least take some money off the table when it comes to flipping. Buy-and-hold could be a good option, but often this strategy will not work in the high-priced markets either, so flippers priced out of those markets may have to look elsewhere to invest. Several flippers we've talked to in the bellwether market of Southern California have actually stopped flipping in favor of getting into other real estate investing strategies. One is leveraging his flipping crews to do quick and efficient home remodels for homeowners, another is buying nonperforming notes. Another option would be moving to markets more favorable for flipping, particularly in the Midwest and South.” As GlobeSt.com reported in July, markets with certain supply-and-demand traits are more ideal for flipping homes than those without these traits, Blomquist told us exclusively.

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