It is a great time to be selling a house. According to new statistics out of ATTOM Data Solutions, the average seller in the fourth quarter of 2017 enjoyed a home price gain of $54,000, which marks more than a ten-year high. (In the fourth quarter of 2016, the average realized home price gain was $47,133.)
But if you live in California, the profits to be had are substantially higher. The Orange County Register analyzed the data from ATTOM and found that thirteen of the most profitable metro areas in the country are in California.
The hottest California market is Silicon Valley (San Jose, Santa Clara, and Sunnyvale), where home sellers realized an average profit of an astonishing $426,488. The next highest profits were found next door in the San Francisco/Oakland area, with average profits of $318,000. Other top profits came from Napa, Santa Rosa, and Santa Cruz.
And Southern California didn’t disappoint, either. The Los Angeles/Orange County market ranked sixth nationally, with average profits of $202,875. San Diego came in twelfth at $161,063. Other areas that did well included Santa Barbara, San Luis Obispo, Salinas, Truckee, and the Inland Empire.
These staggering profits are great news for people who already own homes, but they’re not the best news for people who want to enter the housing market. A favorite strategy of house flippers is to get house flipping loans for multiple flips at the lower end of the market, but in California, a “lower end” doesn’t really exist.
So what can house flippers with limited resources do in this ultra-expensive and also ultra-profitable California environment?
One solid strategy is to focus on high-end flips. We don’t recommend this course if you’re a new house flipper, but if you have good experience, securing house flipping funding for one or two luxury flips at a time can be extremely lucrative. You’re more likely to have some breathing room in this part of the market, because fewer house flippers have the resources and experience to work in this market segment.
Another great strategy is go heavy on the research and figure out which previously underwhelming, underrated neighborhoods are starting to be favored by buyers. Remember to look at an area’s historical demographics but also how the demographics have changed over the last five years. In these areas, do what you can to appeal to new buyers, but also be careful to respect the character and history of the neighborhood.
For more tips and insights, feel free to give our office a call anytime at (559) 326-2509.