Home Flipping Loan Volume at 9-Year High

ATTOM Data Solutions, Irvine, Calif., estimated $3.5 billion in loans for home flipping took place in the first quarter, reaching a nine-year high.

However, the company’s quarterly U.S. Home Flipping Report said average flipping returns declined for the second consecutive quarter, despite the increased dollar volume. ATTOM said 43,615 single-family homes and condos were flipped in the first quarter–defined as sold in an arms-length transfer for the second time within a 12-month period–down 8 percent from the fourth quarter and down 6 percent from a year ago to the lowest number of homes flipped since Q1 2015, a two-year low.

The report said home flips in the first quarter accounted for 6.7 percent of all single-family home and condo sales, up from 5.8 percent in the previous quarter and unchanged from a year ago. One-third (33.3 percent) of all single family homes and condos flipped in the first quarter were purchased by the flipper with financing, up from 31.9 percent in Q4 2016 and up from 29.5 percent a year ago to the highest level since Q3 2008 (37.6 percent).

“The business of financing for home flippers continued to grow in the first quarter of 2017 even as the home flipping rate plateaued compared to a year ago and average home flipping returns decreased for the second consecutive quarter,” said Daren Blomquist, senior vice president with ATTOM Data Solutions.

Among 85 metropolitan statistical areas with at least 90 completed home flips in Q1, those with the highest share originally purchased by the flipper with financing were Colorado Springs, Colo. (69.3 percent); Denver (54.8 percent); Seattle (51.6 percent); Boston (51.3 percent); and Providence, R.I. (47.3 percent). Other markets where more than 40 percent of home flips completed in Q1 were San Diego (46.3 percent); Minneapolis-St. Paul (46.2 percent); Phoenix (44.1 percent); San Francisco (43.0 percent); and Washington, D.C. (40.5 percent).

“With low interest rates, and available lenders willing to provide non-owner occupied loans, we are seeing many of our investors across Southern California take advantage of leverage financing when participating in housing flips,” said Michael Mahon, president at First Team Real Estate, covering the Southern California housing market.

The report said the District of Columbia had the highest home flipping rate in the nation in the first quarter (10.7 percent), followed by Nevada (9.8 percent); Alabama (9.0 percent); Tennessee (8.9 percent); Maryland (8.5 percent); and Missouri (8.0 percent).

Among metros, those with the highest home flipping rate were Memphis, Tenn. (15.1 percent); York-Hanover, Pa. (12.5 percent); Fresno, Calif. (11.1 percent); Birmingham, Ala. (10.3 percent); and Las Vegas (10.0 percent).

The report said homes flipped in the first quarter sold for a median price of $200,000, a gross flipping profit of $64,284 above the median purchase price of $135,716, up from a gross flipping profit of $63,500 in the previous quarter and a gross flipping profit of $59,100 a year ago. ATTOM said this broke a record going back to Q1 2000, as far back as the data is available.

The $64,284 average gross flipping profit translated into an average 47.4 percent gross return on investment for homes flipped in the first quarter, down from an average 49.0 percent average gross flipping ROI in the fourth quarter and an average 48.5 percent average gross flipping ROI a year ago, the second straight quarter where the average gross flipping ROI decreased on a year-over-year basis following six consecutive quarters of year-over-year increases.

States with the highest average gross flipping ROI in the first quarter were Pennsylvania (107.1 percent); Ohio (96.3 percent); Louisiana (96.0 percent); New Jersey (87.1 percent); and Oklahoma (85.7 percent).

Among metro areas, those with the highest average gross flipping ROI were Pittsburgh (141.8 percent); Allentown, Pa. (122.2 percent); Cleveland (118.6 percent); Philadelphia (111.7 percent); and Baltimore (106.0 percent).

Nationwide, the median size of homes flipped in Q1 was 1,402 square feet, down from a median 1,409 square feet in the previous quarter and 1,428 square feet a year ago to the smallest median square footage as far back as the data is available, Q1 2000. The median year built of homes flipped in Q1 2017 was 1978, the same as in the previous quarter but down from a median year built of 1981 for homes flipped a year ago.

Other report findings:

–More than two-thirds (69 percent) of all single-family homes and condos flipped in Q1 were by flippers who completed just one flip during the quarter, while 20 percent were by flippers who completed between two and nine flips during the quarter and 11 percent were by flippers who completed more than 10 flips during the quarter.

–More than one-fourth (26.2 percent) of all completed home flips in Q1 were sold to a cash buyer, indicating another real estate investor, down from 26.3 percent in the previous quarter and down from 27.6 percent a year ago.

–One-fifth (19.2 percent) of all completed home flips in Q1 were sold to FHA buyers, indicating first-time homebuyers, up from 19.1 percent in the previous quarter but down from 19.4 percent a year ago.