Joshua Lott/Reuters

Due to an enduring credit crunch, house-flipping has reached its lowest level in 5 years—but the practice is more profitable than ever.

By one measure, the housing market is finally back to normal. The practice of flipping—whenever a buyer purchases a house and resells it within one year—is down to 4.0 percent of all home sales in the U.S. for the third quarter of 2014. That's the lowest level since 2009, suggesting a return to equilibrium for cities that have experienced a lot of market volatility since the financial crisis (which is most cities).

According to a new report from RealtyTrac, the dust is settling in places like Seattle and Denver, cities where inventory is dwindling and rehab costs are rising. That's not every city: Flipping is up in a few, including Kansas City (up 66 percent from one year ago), Boston (40 percent), New Orleans (38 percent), Indianapolis (35 percent), and Louisville (a whopping 117 percent). But flipping is down in enough cities that the national picture looks clear: A lot of the housing inventory produced by foreclosures is now gone.

A tighter market for housing flips would seem to suggest smaller margins for flippers. But the report shows something else.

(RealtyTrac)

In fact, profits for flipping are as high as they've ever been. In the third quarter of 2014, investors on average saw a 36 percent gross return on their investment (not including some costs, including rehab costs). That's down from the average gross one year ago (37 percent) but still quite high, historically.

"The record-high average profits per flip in the quarter demonstrate that flippers are still filling an important niche in an aging housing market with historically low levels of new homes being built," said RealtyTrac Vice President Daren Blomquist in a release. "The most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes."

That means that the buyers still flipping properties in places like Miami, Los Angeles, and New York are making a killing at it.

(RealtyTrac)

Flipped houses that sold for between $1 million and $2 million yielded the largest profits: on average, a 45 percent gross return on investment. That doesn't include rehab costs, which are probably sizable for a home that sells for seven figures, but still. In the hottest markets today, the person who buys a recently flipped home is doing well, but the person who sells it is doing even better.

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