Thursday, September 07, 2006


I have never been an advocate of buying real estate and flipping it. But day trading stocks and flipping real estate has made money for some. When the market value is increasing, it doesn’t take a rocket scientist to buy something for say $100 and sell it for $125. But markets are fickle and will change quickly. Stocks are pretty easy to sell at some price but when the market turns south for real estate, flippers who are highly leveraged into a mortgage can lose some big bucks quickly.

Flipping in the Golden State dipped to its lowest level in more than three years and in some major regions, profits slipped through the fingers of more than half the flippers. It's a sign speculators are shipping out and investors who want to realize a decent return had better get a grip for the long haul.

During the second quarter this year, 2.4 percent of the existing homes sold statewide had been owned for six months or less, down from 3.5 percent during the second quarter in 2005, according to, a San Juan Capistrano, CA-based real estate sales, value and risk analyst. That was the lowest level of flipping since the first quarter of 2003, when it was also 2.4 percent. Flipping recently peaked in California during the first quarter of 2005 when 3.8 percent of properties were sold within six months of the purchase.
Statewide, most flippers still made money, a median $44,500. However, including commissions and sales costs, 24.7 percent of the second quarter's flip sales resulted in a loss. The percentage of flippers who lost money was the highest since 25.8 percent during first quarter of 2002. A year ago only 14.4 percent of flipped sales resulted in a loss. Among those who lost money in the second quarter this year, the median loss was $30,100.

With flipping, some of the hardest hit areas were Marin County, just north of San Francisco, where 73.3 percent of flippers lost money and instead of a median profit, there was a median loss, a whopping $86,725 deficit. Likewise 68.4 percent of flippers in the Central Coast town of San Luis Obispo lost money, a median $15,900 loss. In El Dorado County, 70 percent of flippers lost a median $15,850. Also the larger Northern California region as a whole was in the negative flipping category with 52 percent of flippers losing money, a median $3,125.
Some good advice for flippers and day-traders is to look both ways before making a short-term investment.


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