From the Press of Atlantic City:
The business of buying and selling houses for quick profit is in decline nationally, but a second wave of foreclosures in New Jersey has bumped it up locally.
The practice known in the real estate industry as “home flipping” is defined as the resale of single-family homes within six months of their purchase. It can make money for people when home prices are rising, or when distressed properties are available to be touched up and resold.
Flipping declined nationally from 6.5 percent of home sales in the first quarter of 2013 to 3.7 percent in the first quarter of 2014. Some see that as a good trend.
Blomquist noted, however, that the Jersey Shore retains a rather strong home-flipping market. From March 2013 to April 2014, there were 472 properties flipped in Atlantic County, 206 in Cape May County, 146 in Ocean County and 22 in Cumberland County, according to RealtyTrac data.
He said it probably comes down to an inflated housing inventory that is being fed at the shore by the large number of foreclosures.
“I think in most areas the flipping frenzy will die down. It already has in areas such as Phoenix and Las Vegas. There’s less inventory for flippers to buy. You’ll see less in Atlantic City as foreclosure numbers decline,” Blomquist said.
Foreclosures in Atlantic County rose 116 percent between the first quarter of 2013 and the first quarter of this year. They were up 90 percent in Cape May County, 127 percent in Cumberland County, and 71 percent in Ocean County during that time. New Jersey is fifth in the nation for foreclosure filings.
Anthony D’Alicandro, a real estate agent with Coldwell Banker Casa Bella in Linwood, said the foreclosure trend is far from over. He knows of about 100 properties that have gone through foreclosure and are not even on the market yet.
“Foreclosures are up substantially. This presents a lot of flip opportunities,” D’Alicandro said.
He noted banks are starting to renovate some houses for sale. They key is to do the work and keep the price in the median home value for the area.
“If they’re in good condition, they’re selling for every bit of market value,” he said.
The average gross return on the home-flipping investment, nationally and in New Jersey, is about 30 percent, according to RealtyTrac figures. The national average purchase price is $183,276, with the home sold within six months for $238,850. The New Jersey average purchase price is $228,962, with the home selling for $298,505.
RealtyTrac figures for counties for the 12 months ending April 1 show the return is much higher for home flippers at the shore, with the exception of those in Cape May County.
Atlantic County had an average purchase price of $115,550 and a sale price of $186,612, for a gross return of 62 percent.
Ocean County had an average purchase price of $153,028 and a sale price of $220,928, for a return of 44 percent.
Cumberland County has a purchase price of $80,156 and a sale price of $146,311, for a return of 83 percent.
Cape May County had a purchase price of $508,338 and a sale price of $638,865, for a return of 26 percent.