U.S. Home Flipping Returns Drop to Two-Year Low in Q3 2017
YTD 2017 Home Flips Still on Pace to Equal 10-Year High 0f 2016;
Lowest Ratio of Flips Per Investor Since Q2 2008
IRVINE, Calif. – Dec. 7, 2017 — ATTOM Data Solutions, curator of the nation’s largest multi-sourced property database, today released its Q3 2017 U.S. Home Flipping Report, which shows that single family homes and condos flipped in the third quarter yielded an average gross flipping profit of $66,448 per flip, representing an average 47.7 percent return on investment for flippers — down from 48.7 percent in the previous quarter and down from 51.2 percent in Q3 2016 to the lowest average gross flipping ROI since Q2 2015.
The report also shows that 48,685 single family homes and condos were flipped nationwide in the third quarter, a home flipping rate of 5.1 percent — down from 5.6 percent in the previous quarter and unchanged from a year ago. Year-to-date through the third quarter of 2017 a total of 153,727 single family homes and condos nationwide have been flipped, nearly equal with the 153,854 flipped through the first three quarters of 2016, when the number of homes flipped increased to a 10-year high.
For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80 percent of the U.S. population (see full methodology below).
“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,” said 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.”
Home flipping rate increases in 47 percent of markets
The Q3 2017 home flipping rate increased from a year ago in 44 of the 93 metropolitan statistical areas analyzed in the report (47 percent), led by Baton Rouge, Louisiana (up 140 percent); Winston-Salem, North Carolina (up 58 percent); Salem, Oregon (up 51 percent); Indianapolis, Indiana (up 51 percent); and Buffalo, New York (up 47 percent).
Along with Indianapolis and Buffalo, metro areas with a population of 1 million or more that posted a year-over-year increase in home flipping rates of at least 10 percent were Louisville, Kentucky (up 22 percent); San Antonio, Texas (up 22 percent); New York, New York (up 21 percent); Cleveland, Ohio (up 17 percent); Birmingham, Alabama (up 17 percent); Charlotte, North Carolina (up 15 percent); Dallas-Fort Worth, Texas (up 14 percent); Rochester, New York (up 13 percent); Detroit, Michigan (up 12 percent); Hartford, Connecticut (up 11 percent); and Memphis, Tennessee (up 10 percent).
The Q3 2017 home flipping rate decreased from a year ago in 49 of the 93 metropolitan statistical areas analyzed for the report (53 percent), including Los Angeles (down 6 percent); Washington, D.C. (down 6 percent); Miami (down 15 percent); Boston (down 5 percent); and San Francisco (down 2 percent)
“Across Southern California, investors are finding home flips for investment purchases to be a challenge due to an aging housing inventory requiring greater repair cost coupled with higher acquisition costs due to low available inventory,” said Michael Mahon, president at First Team Real Estate, covering the Southern California housing market. ‘That equates to increased risk for return on investment that is keeping many potential investors on the sidelines.”
Other major markets where the Q3 2017 home flipping rate decreased from a year ago included Seattle (down 8 percent), Minneapolis-St. Paul (down 18 percent); Tampa-St. Petersburg (down 9 percent); Baltimore (down 2 percent); and Denver (down 2 percent).
“Although the number of flips in the Seattle market dropped back to levels not seen since early 2016, they are still well above the levels seen before the recession. I anticipate that the number of flips will continue to fall as home price growth eats into profits, which have been on the decline since 2013,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “The Seattle region housing market remains very tight in terms of inventory and this has put substantial upward pressure on prices. Flippers can function to exacerbate this issue, so the sooner we see the number of flips drop back to pre-recession levels, the better.”
Home flipping returns increase in 37 percent of markets, counter to national trend
Counter to the national trend, average gross home flipping ROI in Q3 2017 increased from a year ago in 34 of the 93 metropolitan statistical areas analyzed in the report (37 percent), led by Baton Rouge, Louisiana (up 116 percent); Spokane, Washington (up 46 percent); Indianapolis, Indiana (up 35 percent); Fresno, California (up 34 percent); and Greensboro-High Point, North Carolina (up 34 percent).
Metro areas with the highest average gross home flipping ROI for properties flipped in the third quarter were Pittsburgh, Pennsylvania (147.7 percent); Baton Rouge, Louisiana (122.2 percent); Philadelphia, Pennsylvania (114.0 percent); Baltimore, Maryland (101.5 percent); and Cleveland, Ohio (98.6 percent).
Metro areas with the lowest average gross home flipping ROI for properties flipped in the third quarter were Austin, Texas (18.7 percent); Reno, Nevada (22.3 percent); Dallas-Fort Worth, Texas (22.7 percent); Kansas City (24.0 percent); and Salt Lake City, Utah (24.9 percent).
Highest home flipping rates in DC, Nevada, Tennessee, Louisiana, Alabama
With home flips representing 8.3 percent of all home sales in Q3 2017, the District of Columbia posted a higher home flipping rate than any state, followed by Nevada (7.6 percent); Tennessee (7.4 percent); Louisiana (7.4 percent); Alabama (7.1 percent); and Arizona (6.9 percent).
Among 93 metropolitan statistical areas analyzed in the report, those with the highest home flipping rates in Q3 2017 were Memphis, Tennessee (12.0 percent); Baton Rouge, Louisiana (9.3 percent); York-Hanover, Pennsylvania (8.7 percent); Lakeland-Winter Haven, Florida (8.5 percent); and Tampa-St. Petersburg, Florida (8.5 percent).
Other high-level takeaways from the report:
- The 48,685 homes flips in Q3 2017 were completed by 38,928 investors, a ratio of 1.251 flips per investor, the lowest ratio of flips per investor since Q2 2008.
- The share of homes flipped in Q3 2017 that were purchased by the flipper with financing represented 34.6 percent of all homes flipped in the quarter, down from 35.5 percent in the previous quarter but still up from 32.3 percent in Q3 2016.
- The share of homes flipped in Q3 2017 that were purchased by the flipper in some stage of foreclosure or as bank-owned homes represented 38.8 percent of all homes flipped during the quarter, down from 40.2 percent in the previous quarter and down from 43.9 percent in Q3 2016.
- The average square footage of homes flipped in Q3 2017 was 1,405, down from 1,412 in the previous quarter to the smallest average square footage on record for the report, going back to Q1 2000.
- Homes flipped in Q3 2017 were purchased at an average discount of 23.9 percent below estimated full market “after repair” value, down from an average discount of 24.2 percent in the previous quarter to the lowest average discount since Q4 2013.
- Homes flips completed in Q3 2017 took an average of 181 days, down from 185 days in the previous quarter and down from 182 days in Q3 2016.
ATTOM Data Solutions analyzed sales deed data for this report. A single family home or condo flip was any transaction that occurred in the quarter where a previous sale on the same property had occurred within the last 12 months. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after repair value). Gross flipping return on investment was calculated by dividing the gross flipping profit by the first sale (purchase) price.
About ATTOM Data Solutions
ATTOM Data Solutions is the curator of the ATTOM Data Warehouse, a multi-sourced national property database that blends property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property characteristic data for more than 150 million U.S. residential and commercial properties. The ATTOM Data Warehouse delivers actionable data to businesses, consumers, government agencies, universities, policymakers and the media in multiple ways, including bulk file licenses, APIs and customized reports.
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