1st Quarter Home Flipping Rate at 21-Year Low; Profits Decline

ATTOM, Irvine, Calif., said home flipping activity fell in the first quarter to the lowest level since 2000.

The company’s quarterly U.S. Home Flipping Report showed 32,526 single-family homes and condominiums in the United States flipped in the first quarter. Those transactions represented only 2.7 percent of all home sales in the first quarter, or one in 37 transactions. This was also down from 4.8 percent, or one in every 21 home sales in the nation during the fourth quarter; and from 7.5 percent, or one in 13 sales, a year ago. The quarterly and yearly drops in the flipping rate marked the largest decreases since at least 2000.

ATTOM said as the flipping rate dropped, both profits and profit margins also declined. The gross profit on the typical home flip nationwide (the difference between the median sales price and the median price paid by investors) declined in the first quarter to $63,500, down from $71,000 in the fourth quarter, but up slightly from $62,000 a year ago.

The slide pushed profit margin returns down, with the typical gross flipping profit of $63,500 in the first quarter translating into a 37.8 percent return on investment compared to the original acquisition price, down from 41.8 percent in the fourth quarter, and from 38.8 percent a year earlier, to its lowest point since second quarter 2011, when the housing market was still mired in the aftereffects of the Great Recession in the late 2000s.

The report said profits and profit margins fell in the first quarter as median prices on flipped homes decreased quarterly for the first time in two years. Homes flipped in the first quarter sold for a median price of $231,500, down 3.9 percent from $241,000 in the fourth quarter. That marked the first quarterly decrease in typical resale prices since fourth quarter 2018 and the largest quarterly decline since the first quarter 2011. The first quarter median, however, improved from $222,000 in the first quarter of last year.

“It’s too early to say for sure whether home flippers indeed have gone into an extended holding pattern. But the first quarter of 2021 certainly marked a notable downturn for the flipping industry, with the big drop in activity suggesting that investors may be worried that prices have simply gone up too high,” said Todd Teta, chief product officer with ATTOM. “After riding the housing boom along with others for years, they now might be having second thoughts. Whether this is the leading edge of a broader market downturn is little more than speculation. But ATTOM will be following all market measures very closely over the coming months to find out.”

The report said home flips as a portion of all home sales decreased in the first quarter in 76 of the 108 metropolitan statistical areas analyzed in the report (70.4 percent). The rate commonly dropped from about 5 percent to 3 percent.

The report also noted median resale prices on home flips in the first quarter were at least twice the median investor purchase price in only five of the 108 metro areas with enough data to analyze (4.6 percent). Highest raw profits in the first quarter, measured in dollars, were again concentrated in the West, Northeast and South.

ATTOM said home flippers who sold homes in the first quarter took an average of 159 days to complete the transactions, the lowest level since third quarter. The latest number was down from an average of 175 in both the fourth quarter and first quarter 2020.

Of the 32,526 U.S. homes flipped in the first quarter, 10 percent were sold to buyers using loans backed by FHA, down from 11.6 percent in the prior quarter and from 14.7 percent a year ago.