Home Flipping Rate at 6-Year High Despite Lower Inventories

Mike Sorohan msorohan@mba.org

June 14, 2018

ATTOM Data Solutions, Irvine, Calif., said despite a quarterly drop in home flipping activity, the percentage of homes flipped reached a six-year high.

The company's its Q1 2018 U.S. Home Flipping Report showed single-family homes and condos flipped in the first quarter, down 4 percent from the previous quarter and down 3 percent from a year ago to a two-year low. However, the 48,457 homes flipped in the first quarter represented 6.9 percent of all home sales during the quarter, up from 5.9 percent in the previous quarter and unchanged from a year ago, matching the highest home flipping rate since Q1 2012.

The report said homes flipped in the first quarter sold at an average gross profit of $69,500, up from an average gross flipping profit of $68,250 in the previous quarter and up from $66,287 in Q1 2017 to the highest average gross flipping profit since ATTOM began tracking in Q1 2000.

ATTOM said the average gross flipping profit of $69,500 in the first quarter translated into an average 47.8 percent return on investment compared to the original acquisition price, down from a 48.9 percent average gross flipping ROI in the fourth quarter and down from an average gross flipping ROI of 50.3 percent in Q1 2017 to the lowest level since Q2 2015, a nearly three-year low.

"The 2018 housing market is a double-edged sword for home flippers," said Daren Blomquist, senior vice president with ATTOM Data Solutions. "Rapidly rising home prices boosted by low available inventory of homes for sale or for rent are padding profits at the back end when flippers sell, but those same market realities are eroding flipping returns at the front end by forcing flippers to pay more to acquire homes to flip."

Seventy-five of 136 metropolitan statistical analyzed in the report (55 percent) posted a year-over-year decrease in their home flipping rate in the first quarter, including Miami (down 16 percent), Los Angeles (down 3 percent), Tampa-St. Petersburg, Fla. (down 13 percent); Washington, D.C. (down 6 percent); and Las Vegas (down 2 percent).

"The market is incredibly hot right now, making it very hard to find homes to flip, but there is an opportunity for flippers to move into the new construction market," said Alex Sifakis, president of JWB Real Estate Capital, a real estate investment company in Jacksonville, Florida, where the home flipping rate decreased 7 percent compared to a year ago in the first quarter. "We will flip about 200 homes this year, but build about 400 new homes--the vast majority of those not in subdivisions but in older neighborhoods where we are buying teardowns or long-vacant lots."

Sixty-one of the 136 metro areas analyzed in the report (45 percent) posted a year-over-year increase in their home flipping rate in first quarter, led by Baton Rouge, La. (up 70 percent); Lincoln, Neb. (up 62 percent); Madison, Wis. (up 55 percent); Columbia, S.C. (up 48 percent); and Atlantic City, N.J. (up 43 percent).

"The lack of houses for sale is probably why the rate is steady over last year even though demand for houses by other investors has never been higher," said David Hicks, CEO of Homevestors, a real estate investment company with more than 900 local franchises across the country.

ATTOM estimated total dollar volume of financing for homes flipped in the first quarter at $3.8 billion, down from $3.9 billion in the previous quarter and down from $4.0 billion a year ago. The report said five zip codes saw an average gross flipping profit above $325,000 per flip: 91356 in Tarzana, Calif. ($425,000); 07307 in Jersey City, N.J. ($385,000); 90066 in Los Angeles ($359,000); 95124 in San Jose, Calif. ($350,000); and 20011 in the District of Columbia ($327,000).

The report said homes flipped in the first quarter took an average of 183 days to complete, up from an average 179 days for homes flipped in the fourth quarter and unchanged from a year ago.

MBA Nominates Susan T. Stewart of SWBC Mortgage as 2019 MBA Vice Chair
MBA NewsLink Staff

The Mortgage Bankers Association nominated Susan T. Stewart, CEO of SWBC Mortgage, San Antonio, Texas, to serve as Vice Chairman for the 2019 membership year.

Stewart will be elected by MBA members at the Association's 105th Annual Convention this October in Washington, D.C.

"Susan is an outstanding leader and a well-respected voice on the most important issues facing our industry," said MBA Chairman Dave Motely, CMB, President Colonial Savings F.A, Fort Worth, Texas. "In addition to MBA, I've worked with her at the Texas Mortgage Bankers Association, and am confident her talents will serve her well in this role."

Stewart currently serves as a member of the MBA Board of Directors, sits on the MBA Residential Board of Governors (RESBOG) and is on the board of the MBA Opens Doors Foundation. In addition to serving on the ODF board, both Stewart and SWBC Mortgage have been recognized as Guardian-level donors of the organization.

Stewart is a past president of the Texas Mortgage Bankers Association and the San Antonio Mortgage Bankers. Additionally, she was appointed to the Texas Mortgage Industry Advisory Committee by the Commissioner of the Texas Savings and Mortgage Banking Division. In 2009, she received the Texas Mortgage Bankers Distinguished Service Award.

Stewart joined SWBC in 1989 and serves as the CEO of SWBC Mortgage Corp. Under her leadership, SWBC Mortgage has grown from three employees to 615 individuals operating in 39 states with annual sales of $3 billion and a servicing portfolio exceeding $10 billion. She received her BBA from the University of the Incarnate Word.

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