House flippers doing well in Tucson, report says

But as the housing sector stabilizes and reality TV-inspired flippers flood the market, the opportunities are not expected to last.

The RealtyTrac U.S. Home Flipping Report says Tucson ranks seventh in the country for profitable flips, along with cities in Maryland, Florida and Michigan.

“Take it as a good sign,” said Daren Blomquist, vice president of RealtyTrac. “It’s a healthy housing market and it’s attracting investors.”

He said Tucson is a good market because the average purchase price for a house was about $86,000 which was flipped, on average, for about $135,000.

“That’s a good margin for rehabbing a home and still selling it under the $150,000 range,” Blomquist said “For those homebuyers looking for move-in ready homes in mint condition, it’s the closest thing to to a new home without buying a new home.”

The resale activity, coupled with falling foreclosures, is a sign that “we are actually in a recovery,” said local real estate analyst Ginger Kneup.

In March, the resale market included only 14.5 percent of foreclosed homes, “the smallest share of monthly foreclosure sales since we began tracking them in 2008,” said Kneup, owner of Sahuarita-based Bright Future Real Estate Research.

“When we factor out foreclosures, the improvements in median resale pricing amount to 23 percent in three years,” she said. “Sustaining this improvement in the resale inventory is the key to real recovery across the board.”

While most see the resale and flipping activity as a good sign for the housing market, there is some caution to be heeded.

“Flippers can overheat a market if there’s too much going on, artificially inflating the value of a property,” Blomquist said. “It’s an unregulated market, which is great for entrepreneurs to jump into, but it also creates some danger.”

The only regulation on flipping is from the Federal Housing Administration. No FHA loan can be used to buy a home that was purchased within 90 days of the pending sale. Even homes sold within a year of purchase require extra documentation.

For Tucson flippers the profits are good, but the activity isn’t excessive with a little more than 50 houses flipped in the first quarter of 2015.

“I feel like there’s not as many opportunities (for flips) as there once were, which shows a normalization of our market,” said Nicole Brule-Fisher, president of the Tucson Association of Realtors. “I’ve seen a continued improvement overall with the stress inventory decreasing, both foreclosures and short sales.”

And, none of the changes have been sudden or dramatic, she said.

“These incremental gains are good,” Brule-Fisher said. “We haven’t shot up or shot down.”

Susan Marshall, a Realtor with Tierra Antigua and a home flipper, sees her role as one that helps the local economy.

“We’re aware that we play a part in the restoration of the Tucson market,” she said. “Most of what we do is buy homes that are in such disrepair that most residential buyers can’t buy it.

“We’re not taking homes homes away from other people who could come in and do a little painting.”

Along with her husband, Rick, Marshall has been flipping homes since 2010 and fixes up about 10 homes a year.

“We got started because of all the changes in the market. Buyers were tentative and it was tough,” she said of her real estate business. “We had to create an opportunity for ourselves.”

While the Marshalls did most of the remodeling in the beginning, they are now able to use contractors for a lot of the work.

“That’s exciting for us because initially we were trying to create an opportunity for ourselves and now we can provide work for contractors,” Marshall said. “Now they have something more regular.”

Interest in the flipping market has been fueled by reality TV and workshops that sell methods for flipping.

“While Tucson has been a great place to flip houses, I think it is important to acknowledge that it has really slowed down,” she said. “There used to be a lot of homes with flipping potential. Now there are a lot of flippers and drastically fewer homes to flip.”

But, a market that doesn’t have as much flipping potential is not necessarily bad.

“It means that good things are happening and that we have fewer homes in need of rehabilitation,” Marshall said, “and that’s a good thing.”