ATTOM: Home Flipping Plateaus in 2Q Amid Declining Returns

ATTOM Data Solutions, Irvine, Calif., reported home flipping in the second quarter fell by nearly 7 percent from the first quarter but was unchanged from a year ago.

The company’s quarterly U.S. Home Flipping Report said 53,638 single family homes and condos were flipped nationwide in the second quarter, down by 6.9 percent from the first quarter and representing 5.6 percent of all home sales in that period.

The report also shows an average gross flipping profit of $67,516 for homes flipped in the second quarter, representing a 48.4 percent return on investment for flippers, down from 49.0 percent in the previous quarter and down from 49.6 percent a year ago to the lowest level since Q3 2015. After peaking at 51.1 percent in Q3 2016, average gross flipping ROI nationwide has decreased for three consecutive quarters.

“Home flippers are employing a number of strategies to give them an edge in the increasingly competitive environment where flipping yields are being compressed,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available–often due to foreclosure or some other type of distress. Many of those lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals.

Blomquist added in markets where distressed discounts have largely dried up, “flippers are showing more willingness to leverage financing when acquiring properties, often purchasing closer to full market value and then relying more heavily on price appreciation to fuel their flipping profits.”

The report said more than 35 percent of homes flipped in the second quarter were purchased by the flipper with financing, up from 33.2 percent in the previous quarter and up from 32.3 percent a year ago to the highest level since Q3 2008, a nearly nine-year high. Estimated total dollar volume of financing for homes flipped in the second quarter rose to $4.4 billion, up from $3.9 billion in the previous quarter and up from $3.4 billion a year ago to the highest level since Q3 2007, a nearly 10-year high.

Among 101 metropolitan statistical areas analyzed in the report, ATTOM said Colorado Springs, Colo. (68.4 percent); Denver (56.1 percent); Boston (53.3 percent); Providence, R.I. (51.7 percent); and San Diego (49.0 percent) had the highest percentage of second quarter home flips with financing by the flipper.

Counter to the national trend, 54 metropolitan statistical areas (53 percent) posted a year-over-year increase in home flipping rates in the second quarter, led by Baton Rouge, La. (up 72 percent); Rochester, N.Y. (up 39 percent); Daphne, Ala. (up 29 percent); New York (up 24 percent); and Modesto, Calif. (up 24 percent).

Nationwide, 40.3 percent of all homes flipped in the second quarter were purchased as foreclosures or as bank-owned properties, down from 43.3 percent in the previous quarter and down from 44.4 percent a year ago. A high of 70.4 percent of homes flipped in Q1 2010 were purchased as foreclosures or as REOs. States with the highest share of second quarter home flips purchased as foreclosures or as REOs were Indiana (61.1 percent), New Jersey (60.0 percent), Maryland (59.4 percent), Illinois (52.7 percent) and Ohio (52.3 percent).

Among 101 metropolitan statistical areas analyzed in the report, those with the highest share of second quarter home flips purchased as foreclosures or as REOs were York, Pa. (62.9 percent); Rochester, N.Y. (61.4 percent); Flint, Mich. (61.3 percent); Lakeland, Fla. (59.2 percent); and Visalia-Porterville, Calif. (58.3 percent).

The report said 25.4 percent of all homes flipped in the second quarter were flipped to cash buyers–often other investors–down from 26.2 percent in the previous quarter but up from 24.8 percent a year ago. States with the highest share of flipped homes sold to cash buyers were Michigan (43.4 percent), Alabama (41.2 percent), Louisiana (37.8 percent), Florida (35.9 percent) and Tennessee (34.3 percent).

Nevada posted the highest home flipping rate in the nation in the second quarter (8.4 percent of all home sales were flips), followed by D.C. (8.2 percent), Maryland (7.4 percent), Tennessee (7.3 percent),and Alabama (7.3 percent). Metros with the highest home flipping rate were Memphis, Tenn. (11.1 percent); Fresno, Calif. (9.6 percent); York, Pa. (9.4 percent); Las Vegas (8.9 percent); and Lakeland, Fla. (8.8 percent).