Home Flipping Down in 3Q After Hitting 6-Year High
ATTOM Data Solutions, Irvine, Calif., reported nearly 46,000 single-family and condo home flips in the third quarter, down from a six-year high in the second quarter and down slightly from a year ago.
The company’s U.S. Home Flipping Report said 45,718 single family home and condo sales represented flips in the third quarter, accounting for 5.1 percent of all sales during the quarter. This rate was down from a 5.6 percent rate in the previous quarter and unchanged from a year ago.
Homes flipped decreased from a six-year high of 53,892 in the previous quarter and was down from 49,305 homes flipped a year ago. A total of 35,764 entities flipped properties in the third quarter, down 14 percent from a nine-year high in the previous quarter and down 7 percent from a year ago.
“While the macro trends of low housing inventory and rising home prices are favorable for flippers, they are also a double-edged sword, attracting more competition and reducing the availability of deals–particularly in the most fundamentally sound local markets,” said ATTOM Senior Vice President Daren Blomquist. “This is chasing some investors into markets and neighborhoods that may be less fundamentally sound but also offer more value-add opportunities for flippers in the form of aging housing inventory.”
ATTOM said of the 45,718 homes flipped in the third quarter, 67.9 percent were purchased with cash, down from 68.2 percent in the previous quarter and down from 69.0 percent a year ago to the lowest level since Q3 2008.
Among 92 metropolitan areas with at least 90 homes flipped in the third quarter, those with the lowest share purchased with cash were Colorado Springs, Colo. (35.6 percent); Harrisburg, Pa. (39.1 percent); Denver (44.6 percent); Seattle (52.4 percent); and Providence, R.I. (52.8 percent).
Metro areas with the highest flipping rate were Memphis (11.0 percent); Clarksville, Tenn. (9.5 percent): Deltona-Daytona Beach-Ormond Beach, Fla. (9.3 percent); Tampa-St. Petersburg (9.3 percent); and Visalia-Porterville, Calif. (9.3 percent).
The report said homes flipped in the third quarter sold on average for $190,000, an average gross flipping profit of $60,800 more than the average purchase price of $129,200. That was down from an average gross flipping profit of $62,424 in the previous quarter–the highest going back to Q1 2000, the earliest historical data available in the report.
The average gross flipping profit represented an average gross flipping return on investment of 47.1 percent of the purchase price, down from an average gross flipping ROI of 49.5 percent in the previous quarter and down from 47.9 percent a year ago.
“While the high-level gross flipping profits are impressive, it’s important to note that they do not include all the costs incurred by flippers, including rehab, financing, property taxes and other carrying costs,” Blomquist said. “It’s also important to note that the overall averages mask the fact that not every flip ends profitably for the investor. About 8 percent of the homes flipped in the third quarter actually sold for less than what the flipper purchased them for, and about 21 percent of the flips yielded a gross flipping ROI below 10 percent–likely meaning the flipper walked away with a net loss on the deal.”
Metro areas with the highest average gross flipping ROI for homes flipped during the quarter were Cleveland (155.3 percent); Pittsburgh (146.9 percent); Reading, Pa. (116.0 percent); Philadelphia (114.8 percent); and Clarksville, Tenn. (107.4 percent).
The report said homes flipped in third were purchased by the flipper at a 25.2 percent discount below full “after repair” market value on average and sold by the flipper for a 6.7 percent premium above market value on average. Markets where flippers purchased at the biggest discount on average were Pittsburgh (53.5 percent); Reading (51.6 percent); Cleveland (51.3 percent); Clarksville (46.6 percent); and Philadelphia (46.3 percent).
Other metrics:
–Homes flipped in the third took an average of 180 days to flip, down from a 10-year high of 185 days in the previous quarter, but still up from an average 176 days a year ago.
–More than half (53 percent) of all homes flipped in third quarter were sold by the flipper for $200,000 or less, while 33 percent of all homes flipped during the quarter were sold by the flipper for between $200,000 and $400,000. Homes flipped for $500,000 or more accounted for less than 9 percent of all flips during the quarter, and homes flipped for $1 million or more accounted for less than 2 percent of all flips during the quarter.
–Flipped homes sold by the flipper for between $50,000 and $200,000 yielded an average gross flipping ROI of 58 percent, the highest among price ranges in the third quarter. Homes flipped for between $2 million and $5 million yielded an average gross flipping ROI of 26 percent, the lowest among price ranges for the quarter.