ATTOM: Home-Flipping at Six-Year High

ATTOM Data Solutions, Irvine, Calif., said investors flipped more than 51,000 single-family home and condo sales in the second quarter, a 14 percent increase from the first quarter and up by 3 percent from a year ago to the highest level since 2010.

The company’s Q2 2016 U.S. Home Flipping Report also said the number of investors flipping homes rose to nearly 40,000, a nine-year high.

ATTOM defines a home flip as a property sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data in more than 950 counties accounting for more than 80 percent of the U.S. population.

The report said homes flipped in the second quarter accounted for 5.5 percent of all single family and condo sales during the quarter, down from 6.7 percent of all sales in the first quarter but up from 5.4 percent of all sales a year ago.

“Home flipping is becoming more accessible for smaller operators thanks to an increasingly competitive lending environment with more loan options for real estate investors, who are also benefitting from the historically low mortgage interest rates,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “That favorable lending environment for flippers has helped to fuel the recent flipping frenzy we’ve seen over the past five quarters.”

Blomquist said data show home flipping hit milestones not seen since prior to the financial crisis–home flippers are realizing a much bigger gross return on investment in 2016, averaging 49 percent in the first two quarters compared to an average gross ROI of just 27 percent in 2006. Additionally, while an increasing number of flippers are financing their purchases, more than two-thirds are still using cash to purchase compared to about one-third using cash to purchase back in 2006.

ATTOM said of the 51,434 homes flipped in the second quarter, 68.3 percent were purchased with cash by the flipper, down from 71.1 percent in the previous quarter and down from 69.6 percent a year ago to the lowest level since third-quarter 2008, a nearly eight-year low.

“The single-family real estate sector is becoming more institutional, which means that more financing is available and more attractive,” said Varun Pathria, CEO ofat Asset Avenue, a company that provides investor rehab, bridge and rental loans. “The entrepreneurs are also becoming savvier and as a result are looking to leverage their capital more. There continues to be a fringe group of people who enter and exit the sector based upon opportunity and those people are hard to predict but generally look to take maximum leverage.”

ATTOM said homes flipped in the second quarter sold on average for $189,000, $62,000 more than the average purchase price of $127,000. Average gross profit improved from an average $59,250 gross flipping profit in the previous quarter and up from an average $57,900 gross flipping profit a year ago to the highest average gross flipping profit since first-quarter 2000, the earliest quarter tracked in the report.

The report said homes flipped in in the second quarter took an average of 185 days to flip, up from 180 days from the previous quarter and up from 182 days a year ago to the highest level since second-quarter 2006, a 10-year high.

Among 100 metropolitan statistical areas with at least 90 home flips in the second quarter, those with the longest average time to flip were Ogden-Clearfield, Utah (229 days); Naples, Fla. (222 days); Punta Gorda, Fla. (212 days); Palm Bay-Melbourne-Titusville, Fla. (206 days); and Pensacola, Fla. (206 days).

Among 100 metropolitan statistical areas with at least 90 homes flipped in the second quarter, those with the highest flipping rate were Memphis (11.1 percent); Visalia-Porterville, Calif. (10.1 percent), Tampa (10.0 percent); York-Hanover, Pa. (9.7 percent); and Mobile, Ala. (9.6 percent).

Metro areas with the highest gross ROI for homes flipped in the second quarter were Pittsburgh (133.3 percent), Allentown, Pa. (117.9 percent); New Orleans (111.5 percent); Cleveland (102.6 percent); and Philadelphia (98.9 percent).

ATTOM said 35 percent of all homes flipped in the second quarter were sold by the flipper for between $100,000 and $200,000, the biggest share of any price range, but the biggest year-over-year increase in terms of price range was homes flipped in the $200,000 to $300,000 range, up 10 percent from a year ago. Homes flipped for more than $5 million yielded the highest average gross ROI (73 percent), followed by the $50,000 to $100,000 price range (58 percent) and the $100,000 to $200,000 price range (58 percent). Homes purchased by the flipper at a 25.7 percent discount below full “after repair” market value on average and sold by the flipper for a 9.2 percent premium above market value on average.