Home Flipping Returns Drop
U.S. home flipping returns dropped to a nearly eight-year low in the second quarter of 2019. That’s according to a second quarter U.S. Home Flipping Report that ATTOM Data Solutions released on Sept. 19.
The report showed that 59,876 U.S. single family homes and condos were flipped in the second quarter of 2019, a 12.4% percent increase from the previous quarter, but a decrease of 5.2% from a year ago.
Homes flipped in the second quarter represented 5.9% of all home sales during the quarter, down from a post-recession high of 7.2% in the previous quarter, but up from 5.4% a year ago. They typically generated a gross profit of $62,700 (the difference between the median sale price and median paid by investors), up 2% from the previous quarter, but down 2% from a year ago.
That typical gross flipping profit of $62,700 translated into a 39.9% return on investment compared to the original acquisition price, down from a 40.9% gross flipping ROI in the first quarter of 2019 and from a margin of 44.4% in second quarter 2018. Returns on home flips have dropped six quarters in a row and eight of the last 10, marking the lowest level since fourth quarter 2011.
Despite the quarterly drop in home-flipping rates, 104 of 149 metropolitan statistical areas analyzed in the report (70%) posted a year-over-year increase in their rates in second quarter 2019.
Among the areas analyzed, the number of homes flipped reached new peaks in second quarter 2019 in 10 MSAs. The largest were Charlotte, North Carolina; San Antonio, Texas; Pittsburgh, Pennsylvania; Oklahoma City, Oklahoma; and Raleigh, North Carolina.
The total dollar volume of financed home flip purchases in the second quarter of 2019 was $8.4 billion, up 31.3% from $6.4 billion in second quarter 2018 to the highest level in 13 years, since third quarter 2006.
Flipped properties originally purchased by the investor with financing represented 41% of all home flips for the time period, up slightly from 40.8% in the previous quarter, but down from 45.9% a year ago.
Among the 149 metropolitan statistical areas analyzed in the report with at least 50 home flips completed in second quarter 2019, five had gross ROI flipping profits of more than 100%: Scranton, Pennsylvania (134%); Pittsburgh, Pennsylvania (132.5%); Reading, Pennsylvania (129.3%); Kingsport, Tennessee (104.1%) and Augusta, Georgia (101.1%).
Homes flipped in the second quarter of 2019 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 2019 figure was up from a gross flipping profit of $61,500 in the previous quarter, but down from $64,000 in second quarter 2018.
During the time period, the average time to flip nationwide was 184 days, up from an average of 180 days for homes flipped in the previous quarter and up from an average of 183 days a year ago.
