Investors More Cautious About Flipping

December 8, 2017

As home prices rise, investors are getting more jittery about home flipping.

Single-family homes and condos flipped in the third quarter yielded an average gross flipping profit of $66,448 per flip, according to ATTOM Data Solutions’ Q3 2017 U.S. Home Flipping Report. That is down from 51.2 percent a year ago, and it marks the lowest average gross flipping ROI since the second quarter of 2015, according to ATTOM Data Solutions, a real estate data firm.

In the third quarter, 48,685 single-family homes and condos were flipped nationwide. The home flipping rate of 5.1 percent is down from 5.6 percent in the previous quarter but is unchanged from a year ago. ATTOM Data Solutions defines a home flip as a property that has sold for a second time within a 12-month period.

“Home flipping profits continue to be squeezed by a dwindling inventory of distressed properties available to purchase at a discount and increasing competition from fair-weather home flippers often willing to operate on thinner margins,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “A more than nine-year low in the ratio of flips per investor is evidence of this increased competition, which is pushing many investors to new metro areas that often have weaker market fundamentals but also come with a bigger supply of discounted distressed properties to flip.”

Still, 44 of the 93 metro areas analyzed by ATTOM Data Solutions posted an uptick in home flipping in the third quarter compared to a year ago. The markets seeing the largest increases over the year are: Baton Rouge, La. (up 140%); Winston-Salem, N.C. (up 58%); Salem, Ore. (up 51%); Indianapolis, Ind. (up 51%); and Buffalo, N.Y. (up 47%).

On the other hand, 53 percent of the metros analyzed saw the home flipping rate decrease from a year ago. The metros posting the largest decreases in the third quarter compared to a year ago are: Miami (down 15%); Los Angeles (down 6%); Washington, D.C. (down 6%); Boston (down 5%); and San Francisco (down 2%).

 

 

 

Source: “U.S. Home flipping Returns Drop to Two-Year Low in Q3 2017,” ATTOM Data Solutions (Dec. 5, 2017)