Home flipping, in which a buyer quickly resells a property for a profit, is becoming more popular for high-end houses in the U.S. as deals for cheaper residences slow.
There were 968 single-family houses priced at $750,000 or more that were sold by flippers in the third quarter, according to RealtyTrac, which defines the transactions as those that occur within six months of the previous purchase. The figure was up 34 percent from a year earlier, while rapid trades within the broader market fell 13 percent, the Irvine, California-based foreclosure-data firm said in a report today.
Investors who buy homes and sell them within months are finding they can make more money with houses in higher price ranges from New York to California. Flippers for cheaper homes are facing competition by investors such as Blackstone Group LP (BX) that are acquiring thousands of single-family homes to turn into rentals, while fewer properties are entering the foreclosure pipeline as real estate prices rise and the job market improves.
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For the past three years they have been swarming over the hardest hit housing markets, buying distressed properties in bulk and pushing prices higher by double digits. The idea for these investors was not to buy and flip, but to hold and rent. Now some investors say they have priced themselves out of the market.
“Higher prices are reducing returns on investment, and investors are responding by cutting back on their purchasing plans until conditions sort out,” said Chris Clothier, a partner in MemphisInvest.com and Premier Property Management Group, which commissioned a national survey of investors conducted by ORC International. “Fewer foreclosures, rising property values and competition from hedge funds are making it tough to find good deals on distress sales.”
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