U.S. Home Flipping Rate at 9-Year High
ATTOM Data Solutions, Irvine, Calif., said even though overall home flipping activity fell in the first quarter, the rate of flipped home sales reached its highest rate since 2010.
The company’s Q1 2019 U.S. Home Flipping Report showed 49,059 U.S. single family homes and condos flipped in the first quarter, down by 2 percent from the previous quarter and down by 8 percent from a year ago to a three-year low. However, homes flipped in the first quarter represented 7.2 percent of all home sales during the quarter, up from 5.9 percent in the previous quarter and up from 6.7 percent a year ago to the highest home flipping rate since Q1 2010.
The report said homes flipped in Q1 sold at an average gross profit of $60,000, down from $62,000 in the previous quarter and down from $68,000 a year ago to the lowest average gross flipping profit since Q1 2016. Average profits translated into an average 38.7 percent return on investment compared to the original acquisition price, down from a 42.5 percent average gross flipping ROI in the fourth quarter and down from an average gross flipping ROI of 48.6 percent in Q1 2018 to the lowest level since Q3 2011.
“With interest rates dropping and home price increases starting to ease, investors may be getting out while the getting is good, before the market softens further,” said Todd Teta, chief product officer with ATTOM Data Solutions. “While the home flipping rate is increasing, gross profits and ROI are starting to weaken and the number of investors that are flipping is down 11 percent from last year. Therefore, if investors are seeing profit margins drop, they may be acting now and selling before price increases drop even more.”
Other report highlights:
–Eighty-five of 138 metropolitan statistical analyzed in the report (62 percent) posted a year-over-year increase in their home flipping rate in Q1, including Columbus, Ga. (up 83 percent); Raleigh, N.C. (up 73 percent); Charlotte, N.C. (up 65 percent); McAllen-Edinburg, Texas (up 55 percent); and Milwaukee (up 49 percent).
–Total dollar volume of financed home flip purchases rose to $6.4 billion for homes flipped in the first quarter, up by 35 percent from $4.7 billion a year ago to the highest level since Q2 2007. Flipped homes originally purchased by the investor with financing represented 37.5 percent of homes flipped in Q1, down from 39.5 percent in the previous quarter and down from 41.2 percent a year ago.
–Among 53 metropolitan statistical areas analyzed in the report with at least 1 million people, those with the highest percentage of Q1 completed flips purchased with financing were San Diego (56.0 percent); Seattle (52.5 percent); San Francisco (51.7 percent); Denver (51.6 percent); and Boston (51.3 percent).
–Among the 138 metropolitan statistical areas analyzed in the report with at least 50 home flips completed in Q1, those with the highest average gross flipping ROI were Pittsburgh (131.2 percent); Flint, Mich. (127.6 percent); Shreveport, La. (112.5 percent); Scranton, Pa. (112.0 percent); and Knoxville, Tenn. (105.0 percent).
–Homes flipped in the first quarter were sold for a median price of $215,000, a gross flipping profit of $60,000 above the median purchase price of $155,000, down from $62,000 in the previous quarter and a gross flipping profit of $68,000 a year ago to the lowest levels since Q1 2016.
–Markets that saw the lowest gross flipping profit were McAllen-Edinburg, Texas (profit of $8,752); Daphne, Ala. (profit of $15,761); Boise City, Idaho (profit of $18,332); Lexington, Ky. (profit of $20,000); and San Antonio, Texas (profit of $23,596).
–Homes flipped in Q1 took an average of 180 days to complete the flip, up from an average 175 days for homes flipped in Q4 2018 but down from 182 days a year ago.
–Of the 49,059 U.S. homes flipped in Q1, 14.2 percent were sold by the flipper to a buyer using a loan backed by FHA, up from 13.2 percent in the previous quarter but down from 15.2 percent a year ago.
