South Tacoma was among the hottest markets nationwide last year for home flippers, a new report shows.
Such home flips have been more common in urban centers, such as Seattle, in the past. But now investors are seeking bargains and higher rates of return in outlying markets, such as Tacoma, according to a new report by ATTOM Data Solutions, a real estate data firm.
“Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount,” said Daren Blomquist, senior vice president at ATTOM Data Solutions in a news release.
Nationwide, flipped homes — properties bought and then resold within a year — sold for $62,624 more than investors paid last year. That’s not all profit; home flippers often buy homes in less-than-ideal condition and then spend money to spruce them up for sale.
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In ZIP code 98409 — roughly South Tacoma — homes sold for $94,500 more than what investors paid and took an average of six months to flip, with return on investment nearly 100 percent, according to ATTOM. Last year, 75 homes were flipped in that ZIP code, ATTOM’s data show.
More than one in five homes sold in South Tacoma last year was a flip — among only 39 ZIP codes in the country with that distinction. Nationwide in 2016, only 5.7 percent of home and condominium sales were flips. In 2005, before the Great Recession, 8.2 percent of sales were flipped condos and homes.
In other areas of Tacoma, gross profit was higher, but the return on investment a lower percentage. In Tacoma roughly north of North 26th Street — ZIP code 98407 — flippers sold 31 homes with an average of $143,000 in gross profit. However, the rate of return was less, around 76 percent.
Home flips are often fueled by a sellers market with few homes for sale. Last month, inventories were low in Pierce and Thurston counties with less than two months of inventory, according to the Northwest Multiple Listing Service.
“I believe flipping serves as a negative for any housing market because it further erodes housing affordability. But if there’s a demand for it in the market, it’s a trend we will continue to see,” said Matthew Gardner, chief economist at Windermere Real Estate.