U.S. Home Flipping Increases to Eight-Year High in 2019 While Returns Drop to Eight-Year Low
$32.5 Billion in Financed Flips in 2019, Up 21 Percent From 2018 to 13-Year High; Percent of Flips Purchased with All Cash Rises for First Time Since 2010
IRVINE, Calif. – March 5, 2020 — ATTOM Data Solutions, curator of the nation’s premier property database and first property data provider of Data-as-a-Service (DaaS), today released its year-end 2019 U.S. Home Flipping Report, which shows that 245,864 single family homes and condos in the United States were flipped in 2019, up 2 percent from 2018 to the highest point since 2006.
The number of homes flipped in 2019 represented 6.2 percent of all home sales in the nation during the year, an 8-year high. That was up from 5.8 percent of all home sales in 2018 and from 5.7 percent in 2017.
While flipping activity rose, profit margins continued dropping. Homes flipped in 2019 typically generated a gross profit of $62,900 nationwide (the difference between the median sales price and the median paid by investors), down 3.2 percent from $65,000 in 2018 year and 6 percent from the post-recession peak of $66,899 in 2017.
“Home-flipping profits across the U.S. dropped again in 2019 as the business of buying and selling houses absorbed its worst year since the housing market was mired in the fallout from the Great Recession. This happened as the cost of buying properties continued to rise faster than gains on resale,” said Todd Teta, chief product officer at ATTOM Data Solutions. “That’s not to say that the home-flipping industry is tanking or losing its allure for investors because home flipping rates are higher than they’ve been in eight years. But profits did continue to decline again for investors.”
The typical gross flipping profit of $62,900 translated into a 40.6 percent return on investment compared to the original acquisition price. That was down from a 45.8 percent gross flipping ROI in 2018 and down from 51.4 percent ROI in 2017. The latest typical return on home flips stood at the lowest point since 2011.
“While the gross profit figures do not include the cost of rehabbing the properties, which will serve to reduce profitability, the measure itself is something that Roc Capital focuses on heavily in its underwriting process. Roc delinquency figures have remained static year over year, however we do see a broad increase in nationwide lis pendens filings by lenders in the fix and flip space that exceeds the volume growth evident in this report,” said Maksim Stavinsky, co-founder and COO of Roc Capital.
“For 2019, the YoY increase in lis pendens filings in this space was greater than 50 percent, with most of that increase occurring in the second half of the year, and the first two months of 2020 shows a further 30 percent or greater increase in lis pendens filings over 2019. While actual losses from delinquencies have been low across the space, historically rising delinquencies have been a precursor to losses, so prudent underwriting is more important than ever in this environment. ”
Home flipping rates up in 64 percent of local markets
Home flips as a portion of all home sales increased from 2018 to 2019 in 122 of the 190 metropolitan statistical areas analyzed in the report (64.2 percent). The largest annual increases in the home flipping rate came in Laredo, TX (up 103.5 percent); Raleigh, NC (up 59.8 percent); Charlotte, NC (up 44.1 percent); Fort Smith, AR (up 43.2 percent) and Columbus, GA (up 40.5 percent). Metro areas qualified for the report if they had a population of at least 200,000 and at least 100 home flips in 2019.
Aside from Raleigh, NC, and Charlotte, NC, the biggest annual flipping-rate increases in MSAs with a population of 1 million or more were in Atlanta, GA (up 39.1 percent); San Antonio, TX (up 37.2 percent) and Tucson, AZ (up 34.2 percent).
The biggest decrease in annual flipping rates among MSAs with a population of 1 million or more were in Seattle, WA (down 16.9 percent); Indianapolis, IN (down 9.1 percent); Grand Rapids, MI (down 8.0 percent); Rochester, NY (down 5.9 percent) and Baltimore, MD (down 4.8 percent).
Home flips purchased with financing dip while those bought with cash climb
Nationally, the percentage of flipped homes purchased with financing dipped in 2019 to 43.8 percent, from 45.9 percent in 2018, but was up from 42.9 percent two years ago. Meanwhile, 56.2 percent of homes flipped in 2019 were bought with all-cash, up from 54.1 percent in 2018, but down from 57.1 percent in 2017.
Among metropolitan statistical areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flips purchased with financing in 2019 included Virginia Beach, VA (67.6 percent); Seattle, WA (55.9 percent); San Diego, CA (53.7 percent); Boston, MA (53.6 percent) and San Francisco, CA (52.9 percent).
Typical home flipping returns drop closer to post-Recession low points
Homes flipped in 2019 were sold for a median price of $217,900, with a gross flipping profit of $62,900 above the median purchase price of $155,000. That gross-profit figure was down from $65,000 in 2018 and from $66,899 in 2017. With purchase prices rising faster than profits on investor-bought homes, the 40.6 percent return on median sales prices versus purchase prices was down from 45.8 percent in 2018 and from the post-Recession peak of 51.7 percent in 2016.
Among the 53 markets with a population of 1 million or more, those that saw the smallest gross flipping profits in 2019 included Raleigh, NC ($23,000); San Antonio, TX ($31,756); Phoenix, AZ ($33,641); Las Vegas, NV ($34,300) and Houston, TX ($36,375).
In those same markets, the lowest 2019 returns on investment on the typical sales were in Raleigh, NC (10.5 percent); Austin, TX (13.7 percent); Las Vegas, NV (14.7 percent); Phoenix, AZ (15.1 percent) and Dallas, TX (18.7 percent).
Average time to flip nationwide is 178 days
Home flippers who sold homes in 2019 took an average of 178 days to complete the flips, down slightly from an average of 179 days for homes flipped in 2018.
Percent of flipped homes sold to FHA buyers increases
Of the 245,864 U.S. homes flipped in 2019, 14.4 percent were sold to buyers using a loan backed by the Federal Housing Administration (FHA), up from 13.1 percent in 2018, but down from 16.2 percent in 2017.
Among the 190 metro areas with a population of at least 200,000 and at least 100 home flips in 2019, those with the highest percentage of 2019 home flips sold to FHA buyers — typically first-time homebuyers — were Stockton, CA (29.9 percent); Merced, CA (27.7 percent); Visalia, CA (27.4 percent); York, PA (27.4 percent) and Lakeland, FL (26.4 percent).
Thirty-four counties had a home flipping rate of at least 10 percent
Among 678 counties with at least 50 home flips in 2019, there were 34 counties where home flips accounted for at least 10 percent of all home sales last year. The top five were Portsmouth City/County, VA, in the Virginia Beach metro area (13.9 percent); Prince George’s County, MD, in the Washington, D.C., metro area (13.5 percent); Macon County, TN , in the Nashville metro area (13.4 percent); Shelby County, TN, in the Memphis metro area (12.5 percent) and Clayton County, GA, in the Atlanta metro area (12.3 percent).
Nine zip codes had a home flipping rate of at least 25 percent
Among 6,675 U.S. zip codes with a population of 5,000 or more and at least 10 home flips in 2019, there were nine zip codes where flips accounted for at least 25 percent of all home sales last year. The top five were 78538 in Hidalgo County (McAllen), TX (34.3 percent); 35005 in Jefferson County (Birmingham), AL (29.1 percent); 93212 in Kings County, CA (south of Fresno) (27.8 percent); 38109 in Shelby County (Memphis), TN (27.3 percent) and 10467 in Bronx County, NY, (part of New York City) (26.3 percent).
High-level takeaways from the fourth-quarter 2019 dataset:
- The 56,945 home flips in the fourth quarter of 2019 were completed by 24,096 investors, a ratio of 2.36 flips per investor.
- The share of homes flipped in the fourth quarter of 2019 that were purchased by investors with financing represented 39.6 percent of all homes flipped in the quarter, down from 44.2 percent in the previous quarter and from 45.9 percent in the fourth quarter of 2018, to a three-year low.
- The median gross flipping profit on home flips in the fourth quarter of 2019 was $62,500, which represented an average 39.1 percent return on investment (percentage of original purchase price), down from 40.1 percent in the previous quarter, to an eight-year low.
- Home flips completed in the fourth quarter of 2019 took an average of 170 days, down from 174 days in the fourth quarter of 2018.
ATTOM Data Solutions analyzed sales deed data for this report. A single-family home or condo flip was any arms-length transaction that occurred in the quarter where a previous arms-length transaction 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.
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