Fewer Investors Are Flipping Homes as Profits Weaken
December 7, 2018
More investors are starting to back away from flipping homes as home price gains slow. The average home flipping returns dropped to a 6.5-year low in the third quarter, and the share of flips was down 12 percent, according to a newly released report from ATTOM Data Solutions, a real estate data provider.
A total of 45,901 single-family homes and condos were flipped in the third quarter, the lowest level since the first quarter of 2015. Homes flipped in the third quarter comprised 5 percent of all single-family home and condo sales during the quarter.
“Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “We’ve now seen three consecutive quarters with year-over-year decreases in home flips.” Blomquist says the last time this occurred was in 2014, following a jump in mortgage rates during the second half of 2013.
Homes that were flipped in third quarter sold for an average of $63,000 more than what the home flipper purchased them for, which is down from a record high average gross flipping profit of $68,000 in the first quarter, according to the report.
The metro areas (with populations of at least 200,000) that posted the highest average gross flipping returns in the third quarter were: Pittsburgh (136.7%); Cleveland (120.2%); Atlantic City, N.J. (110.3%); Scranton, Pa. (109%); and Philadelphia (107.9%).
The metros with the overall highest home flipping rates in the third quarter were: Memphis, Tenn. (10.4%); Atlantic City, N.J. (9.1%); Phoenix (8.6%); Las Vegas (7.8%); and Huntsville, Ala. (7.5%).
ATTOM Data Solutions’ report on flipped homes purchased in third quarter also observed that:
- The median year built of homes flipped in the third quarter was 1978.
- The median square footage of homes flipped was 1,408, the smallest median square footage dating back to the first quarter of 2000.
- The average time to complete a home flip was 179 days, down slightly from 180 days a year ago.
“U.S. Home Flips Down 12 Percent in Q3 2018 to 3.5-Year Low,” ATTOM Data Solutions (Dec. 5, 2018)
Updated: May 18, 2019