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Number of Homes Flipped in United States Rises to Highest Level in 15 Years Profit Margins on Flipped Homes Drop at Unusually Fast Pace Percentage of Flips Purchased with Cash Increases ATTOM, a leading curator of real estate data nationwide for land and property data, released its year-end 2021 U.S. Home Flipping Report, which shows that 323,465 single-family homes and condos in the United States were flipped in 2021. That was up 26 percent from 2020, to the highest point since 2006. The report reveals that the number of home flips in 2021 was up from 257,091 in 2020 to a total not seen since nearly 334,000 homes were flipped by investors in 2006. Last year’s flips represented 5.5 percent of all home sales in the nation during 2021, down from 5.8 percent in 2020 and 6.1 percent in 2019. But even as quick-turnaround sales by investors shot up, gross profit margins on home flips in 2021 sank to their lowest level in more than a decade after dropping at the fastest pace in more than 15 years. Homes flipped in 2021 typically generated a gross profit of $65,000 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was down 3 percent from $67,000 in 2020 and translated into just a 31 percent return on investment compared to the original acquisition price – the lowest margin since 2008. The latest ROI (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was down from 41.9 percent in 2020 and 40 percent in 2019. The decline in the ROI also marked the steepest drop since at least 2005, resulting in margins that were commonly down by 20 percentage points from the 51 percent peak over the past decade, hit in 2016. “While gross profits were lower for fix-and-flip investors in 2021, there may have been offsets that protected net profits,” said Rick Sharga, ATTOM’s executive vice president of market intelligence. “Fewer flippers financed their purchases, so their cost of capital was lower. And it took less time to execute a flip, reducing holding costs, and suggesting that less extensive – and less expensive – repairs were needed to bring the properties to market. A lot of the mark-up on fix-and-flip properties historically has come from the value of those repairs, but so have a lot of the costs that reduce net profits.” Investors saw their gross profit margins dip for the fourth time in five years as the median value of the homes they flipped rose more slowly than the median price they paid to purchase properties – 21.1 percent versus 31.3 percent. The decline in home-flipping profits may represent a rare crack in the foundation of the U.S. housing market, which otherwise boomed in 2021 both because of and in spite of the worldwide Coronavirus pandemic. Throughout the two-year-old pandemic, a surge of buyers has flooded the market amid a confluence of key factors. Tops among them have been a combination of historically low mortgage rates and a desire of many households largely unscathed financially by the pandemic to trade densely populated virus-prone areas for the perceived safety and wider spaces offered by a single-family home and yard. Home flipping rates down in slightly more than half of local markets; biggest drops in Northeast and WestHome flips as a portion of all home sales decreased from 2020 to 2021 in 110 of the 209 metropolitan statistical areas analyzed in the report (53 percent). Nine of the 10 biggest decreases in annual flipping rates among MSAs came in the Northeast and West, led by Honolulu, HI (rate down 83 percent); Atlantic City, NJ (down 73 percent); Manchester, NH (down 57.7 percent); Rochester, NY (down 48 percent) and Cedar Rapids, IA (down 47.8 percent). Metro areas qualified for the report if they had a population of at least 200,000 and at least 100 home flips in 2021. Aside from Rochester, the biggest decreases in flipping rates in 2021 across MSAs with a population of 1 million or more were in Las Vegas, NV (rate down 37.2 percent); Minneapolis, MN (down 36.7 percent); Sacramento, CA (down 36.3 percent) and Philadelphia, PA (down 35.4 percent). Home flipping rates increased from 2020 to 2021 in 99 metro areas with sufficient data to analyze (47 percent). The largest annual increases in 2021 in the home flipping rate came in Provo, UT (rate up 114.3 percent); Salt Lake City, UT (up 113.4 percent); Austin, TX (up 111.2 percent); College Station, TX (up 97.4 percent) and Ogden, UT (up 95 percent). Aside from Salt Lake City and Austin, the biggest annual flipping-rate increases in MSAs with a population of 1 million or more were in San Antonio, TX (rate up 56.2 percent); Dallas, TX (up 34.4 percent) and Houston, TX (up 32.3 percent). Share of home flips purchased with financing decreases to lowest level in three years Nationally, the percentage of flipped homes purchased with financing decreased in 2021 to 38.7 percent, down from 41 percent in 2020 and from 39.9 percent in 2019. Meanwhile, 61.3 percent of homes flipped in 2021 were bought with all-cash, up from 59 percent in 2020 and from 60.1 percent two years earlier. “In an environment where mortgage rates are rising as rapidly as they are today, investors buying with cash are at a distinct advantage over consumer homebuyers,” Sharga noted. “The combination of rising home prices, rising mortgage rates and rising inflation is undoubtedly creating affordability issues for many prospective buyers, so it’s possible that there will be less competition overall for the limited inventory of homes available for sale.” Among metropolitan statistical areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flipped homes purchased by investors with financing in 2021 included Louisville, KY (55.6 percent); San Diego, CA (55.4 percent); Seattle, WA (52.6 percent); Portland, OR (48.6 percent) and San Francisco, CA (47.6 percent). In that same group, the metro areas with a population of 200,000 or more that had the highest percentage of flips purchased with all cash included Tuscaloosa, AL (90.6 percent); Buffalo, NY (84.1 percent); Dayton, OH (82.8 percent); Detroit, MI (82.2 percent) and Canton, OH (82.1 percent). Typical gross profits on home flips decline in 2021 after hitting 15-year high Homes flipped in 2021 were sold for a median price nationwide of $275,000, with a
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