Home Flipping at Four-Year Low

Mike Sorohan msorohan@mba.org

September 06, 2018

ATTOM Data Solutions, Irvine, Calif., said with fewer homes available, home flipping in the second quarter fell to its lowest level since 2014.

The company's quarterly U.S. Home Flipping Report said homes flipped in the second quarter yielded an average gross return on investment of 44.3 percent, down from 47.8 percent in the previous quarter and down from 50.0 percent a year ago to the lowest average gross flipping ROI since Q3 2014.

The report said 48,768 U.S. single family homes and condos flipped in the second quarter, representing 5.2 percent of all sales, down from 6.6 percent in the first quarter and down from 5.4 percent a year ago.

ATTOM said homes flipped in the second quarter sold for an average of $65,520 more than what the flipper purchased them for, down from a record-high average gross flipping profit of $69,500 in the first quarter and down from $69,000 a year ago. The average gross flipping profit in the second quarter was the lowest since Q2 2016.

"Fewer distressed sales are limiting the ability of home flippers to find deep discounts even while rising interest rates are shrinking the pool of potential buyers for flipped homes," said Daren Blomquist, senior vice president with ATTOM Data Solutions. "These two forces are squeezing average home flipping returns, pushing investors to leverage financing or migrate to markets with more distressed discounts available to achieve more favorable returns."

The report said of homes flipped in the second quarter, 32.3 percent were purchased by the home flipper via a distressed sale, either in foreclosure or bank-owned, down from 35.8 percent the previous quarter and down from 38.7 percent a year ago. The peak in distressed sales purchases by home flippers was 68.2 percent in Q1 2010.

States with the highest share of second quarter home flips purchased via a distressed sale were New Jersey (64.1 percent); Delaware (60.3 percent); Indiana (55.4 percent); Maryland (52.8 percent); and New York (48.4 percent).

Among 140 metropolitan statistical areas with at least 50 flips in Q2 2018 and a population of at least 200,000, those with the highest share of second quarter home flips purchased via distressed sale were Atlantic City, N.J. (71.0 percent); El Paso, Texas (70.5 percent); Trenton, N.J. (65.2 percent); Virginia Beach, Va. (60.7 percent); and New York, N.Y. (Manhattan) (56.5 percent).

Other report highlights:
--Among home flips completed in the second quarter, 38.6 percent were purchased by the home flipper with financing, up from 36.8 percent in the previous quarter but down from a nearly 10-year high of 39.6 percent a year ago.

--States with the highest share of flips purchased with financing were Rhode Island (63.8 percent); Colorado (57.1 percent); New Hampshire (53.4 percent); Minnesota (50.2 percent); and Washington 50.0 percent). Among metros, highest shares were reported in
Fort Collins, Colo. (66.7 percent); Colorado Springs, Colo. (66.0 percent); Providence, R.I. (60.3 percent); Greeley, Colo. (59.6 percent); and Seattle (54.6 percent).

--States with the highest average gross flipping ROI in Q2 2018 were Louisiana (102.5 percent), Pennsylvania (100.3 percent), Ohio (81.4 percent), Maryland (76.1 percent), and Tennessee (74.9 percent). Leading metros were Pittsburgh (162.7 percent); Hickory-Lenoir-Morganton, N.C. (129.0 percent); Mobile, Ala. (126.6 percent); Buffalo, N.Y. (107.5 percent); and Baton Rouge, La. (107.1 percent).

--The District of Columbia had the highest home flipping rate in the nation in the second quarter (8.3 percent), followed by Nevada (7.4 percent), Tennessee (7.2 percent), Arizona (6.7 percent), Maryland (6.5 percent) and Alabama (6.4 percent). Metros with the highest flipping rates were Memphis, Tenn. (9.7 percent); Clarksville, Tenn. (8.2 percent); Atlantic City, N.J. (7.9 percent); York, Pa. (7.7 percent); and Las Vegas (7.7 percent).

--The average time to complete a home flip was 186 days for flips completed in the second quarter, compared to 182 days in the previous quarter and 185 days a year ago. States with the shortest average time to flip were New Hampshire (151 days); Arizona (161 days), Nevada (167 days), Alabama (168 days) and Missouri (171 days).

--The median year built of homes flipped in the second quarter was 1978, the median square footage of homes flipped was 1,408.

-- 40,265 entities flipped properties in second quarter, a ratio of 1.21 flips per entity, the lowest ratio of flips per entity since Q1 2008.

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