ATTOM: Home Flipping Returns Drop to 8-Year Lows
ATTOM Data Solutions, Irvine, Calif., said home flipping in the second quarter increased by 12.4 percent from the first quarter but fell by 5.2 percent from a year ago.
The company’s Q2 2019 U.S. Home Flipping Report, which shows that 59,876 U.S. single family homes and condos were flipped in the second quarter, representing 5.9 percent of all home sales during the quarter, down from a post-recession high of 7.2 percent in the previous quarter, but up from 5.4 percent a year ago.
Homes flipped in the second quarter typically generated a gross profit of $62,700, up 2 percent from the previous quarter, but down 2 percent from a year ago. The typical gross flipping profit of $62,700 in the second quarter translated into a 39.9 percent return on investment compared to the original acquisition price, down from a 40.9 percent gross flipping ROI in Q1 2019 and from a margin of 44.4 percent in Q2 2018. Returns on home flips have dropped six quarters in a row and eight of the past 10, now standing at the lowest level since Q4 2011.
“Home flipping keeps getting less and less profitable, which is another marker that the post-recession housing boom is softening or may be coming to an end,” said Todd Teta, chief product officer with ATTOM Data Solutions. “Flipping houses is still a good business to be in and profits are healthy in most parts of the country. But push-and-pull forces in the housing market appear to be working less and less in investors’ favor. That’s leading to declining profits and a business that is nowhere near as good as it was a few years ago.”
Other report data:
–Despite the quarterly drop in home-flipping rates, 104 of 149 metropolitan statistical areas analyzed in the report (70 percent) posted a year-over-year increase in their rates in the second quarter.
–Total dollar volume of financed home flip purchases in the second quarter of 2019 was $8.4 billion, up 31.3 percent from $6.4 billion in Q2 2018 to the highest level since Q3 2006.
–Flipped properties originally purchased by the investor with financing represented 41.0 percent of all home flips in the second quarter, up slightly from 40.8 percent in the previous quarter, but down from 45.9 percent a year ago.
–Homes flipped in the second quarter were sold for a median price of $220,000, with a gross flipping profit of $62,700 above the median purchase price of $157,300. The second quarter figure was up from a gross flipping profit of $61,500 in the previous quarter, but down from $64,000 a year ago.
–Homes flipped in the second quarter took an average of 184 days to complete the flip, up from an average of 180 days for homes flipped in the first quarter and up from an average of 183 days a year ago.
–Of the 59,786 U.S. homes flipped in the second quarter, 14.4 percent were sold by the flipper to a buyer using a loan backed by FHA, up from 13.8 percent in the previous quarter and up from 12.8 percent a year ago.
–Among 694 counties with at least 10 home flips in the second quarter, 17 counties saw home flips account for at least 12 percent of all home sales. Sixteen zip codes had a home flipping rate of at least 25 percent.
