Average Flipping ROI Near Three-Year Low Despite All-Time High in Gross Flipping Profit;
Share of Home Flips Purchased With Financing Increases to 9.5-Year High;
Share of Flipped Homes Sold to FHA Buyers Drops to 10-Year Low
IRVINE, Calif. – June 7, 2018 — ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q1 2018 U.S. Home Flipping Report, which shows that 48,457 U.S. single family homes and condos were flipped in the first quarter of 2018, down 4 percent from the previous quarter and down 3 percent from a year ago to a two-year low.
The 48,457 homes flipped in the first quarter represented 6.9 percent of all home sales during the quarter, up from 5.9 percent in the previous quarter and unchanged from a year ago — matching the highest home flipping rate since Q1 2012.
Homes flipped in Q1 2018 sold at an average gross profit of $69,500, up from an average gross flipping profit of $68,250 in the previous quarter and up from $66,287 in Q1 2017 to the highest average gross flipping profit since ATTOM began tracking in Q1 2000.
The average gross flipping profit of $69,500 in Q1 2018 translated into an average 47.8 percent return on investment compared to the original acquisition price, down from a 48.9 percent average gross flipping ROI in Q4 2017 and down from an average gross flipping ROI of 50.3 percent in Q1 2017 to the lowest level since Q2 2015 — a nearly three-year low.
“The 2018 housing market is a double-edged sword for home flippers,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Rapidly rising home prices boosted by low available inventory of homes for sale or for rent are padding profits at the back end when flippers sell, but those same market realities are eroding flipping returns at the front end by forcing flippers to pay more to acquire homes to flip.”
Home flipping rate down from year ago in 55 percent of local markets
Seventy-five of 136 metropolitan statistical analyzed in the report (55 percent) posted a year-over-year decrease in their home flipping rate in Q1 2018, including Miami, Florida (down 16 percent), Los Angeles, California (down 3 percent), Tampa-St. Petersburg, Florida (down 13 percent); Washington, D.C. (down 6 percent); and Las Vegas (down 2 percent).
“The market is incredibly hot right now, making it very hard to find homes to flip — but there is an opportunity for flippers to move into the new construction market,” said Alex Sifakis, president of JWB Real Estate Capital, a real estate investment company based in Jacksonville, Florida, where the home flipping rate decreased 7 percent compared to a year ago in Q1 2018. “We will flip about 200 homes this year, but build about 400 new homes — the vast majority of those not in subdivisions but in older neighborhoods where we are buying teardowns or long-vacant lots.”
Home flipping rate up in Phoenix, New York, Atlanta, Philadelphia, Chicago, Dallas, Detroit
Sixty-one of the 136 metro areas analyzed in the report (45 percent) posted a year-over-year increase in their home flipping rate in Q1 2018, led by Baton Rouge, Louisiana (up 70 percent); Lincoln, Nebraska (up 62 percent); Madison, Wisconsin (up 55 percent); Columbia, South Carolina (up 48 percent); and Atlantic City, New Jersey (up 43 percent).
Among markets with at least 1,000 home flips in the first quarter, those posting a year-over-year increase in their home flipping rate in Q1 2018 were Phoenix, Arizona (up 15 percent); New York, New York (up 20 percent); Atlanta, Georgia (up 4 percent); Philadelphia, Pennsylvania (up 6 percent); Chicago, Illinois (up 7 percent); Dallas-Fort Worth, Texas (up 2 percent); and Detroit, Michigan (up 17 percent).
“The lack of houses for sale is probably why the rate is steady over last year even though demand for houses by other investors has never been higher,” said David Hicks, CEO of Homevestors, a real estate investment company with more than 900 local franchises across the country. Hicks added that more than half of homes purchased by Homevestors franchises are now flipped, compared to about one-third historically. “Our franchises have actually bought 33 percent more houses year-to-date over 2017. Sales are up 32 percent, so we are on track to have a banner year.”
Memphis leads nation with home flipping rate of 15.1 percent
Among 136 metropolitan statistical areas with at least 50 home flips in Q1 2018, those with the highest home flipping rate were Memphis, Tennessee (15.1 percent); Albany, Oregon (11.7 percent); East Stroudsburg, Pennsylvania (11.4 percent); York, Pennsylvania (10.4 percent); and Merced, California (10.3 percent).
Along with Memphis, other metro areas with a population of at least 1 million and a home flipping rate above 9.0 percent were Phoenix (10.3 percent); Virginia Beach (9.9 percent); Las Vegas (9.8 percent); Baltimore (9.7 percent); and Rochester, New York (9.5 percent).
Five zip codes with a home flipping rate of more than 30 percent
Among 1,429 U.S. zip codes with at least 10 home flips in Q1 2018, there were five zip codes where home flips accounted for more than 30 percent of all home sales: 70814 in Baton Rouge, Louisiana (39.0 percent); 19055 in Levittown, Pennsylvania (34.9 percent); 90047 in Los Angeles, California (31.7 percent); and the two Memphis Tennessee zips of 38115 (31.6 percent) and 38141 (30.3 percent).
“I am seeing a lot of new investors around investors’ meetings while more seasoned investors have been holding back and are being more cautious — some invest out of state and some move into different asset classes other than residential,” said Lin He, owner of Rellion, a real estate investment company based in Orange County, California. “On the other hand, the uncertainty over the presidential election is over and generally speaking the ‘animal spirit’ is back. My market posture is to engage the market cautiously. It doesn’t feel like a bubble yet, but the sky-high property values are definitely concerning.”
Highest flipping ROI in Pennsylvania and New Jersey markets
Among the 136 metropolitan statistical areas analyzed in the report with at least 50 home flips completed in Q1 2018, those with the highest average gross flipping ROI were East Stroudsburg, Pennsylvania (164.1 percent); Pittsburgh, Pennsylvania (146.6 percent); Atlantic City, New Jersey (133.3 percent); Reading, Pennsylvania (120.8 percent); and Philadelphia, Pennsylvania (110.2 percent).
Along with Pittsburgh and Philadelphia, metro areas with a population of at least 1 million and an average gross flipping ROI of at least 89 percent were Cleveland, Ohio (109.5 percent); Baltimore, Maryland (102.9 percent); New Orleans, Louisiana (98.8 percent); Buffalo, New York (96.4 percent); and Memphis, Tennessee (89.1 percent).
Share of flipped homes purchased with financing rises to more than nine-year high
Homes flipped in Q1 2018 that were originally purchased with financing by the home flipper represented 35.7 percent of all homes flipped during the quarter, up from 35.3 percent in the previous quarter and up from 33.5 percent a year ago to the highest level since Q3 2008 — a nine and a half year high.
“We field multiple phone calls every week from institutional investors who want to work with us,” said Matt Humphrey, co-founder and CEO of LendingHome, a fix-and-flip lender. “Wall Street has become more comfortable with the fix-and-flip space because they now have access to four years of performance data, and they’ve actively watched the development of this asset class. Large-scale, low-cost financing coupled with efficient tech-driven operations — like ours at LendingHome — means lower fees to borrowers with terms that work for them. There are simply more opportunities to get in the game. Flipping is no longer relegated to the lucky ones who have relationships with hard money lenders across town.”
Among the 136 metro areas analyzed in the report, those with the highest share of home flips purchased with financing were Colorado Springs, Colorado (63.9 percent); Madison, Wisconsin (63.0 percent); Boston, Massachusetts (56.3 percent); Greeley, Colorado (56.3 percent); and Denver, Colorado (56.1 percent).
Total estimated dollar volume of financing for homes flipped in Q1 2018 was $3.8 billion, down from $3.9 billion in the previous quarter and down from $4.0 billion in Q1 2017.
Five zip codes with an average gross flipping profit above $325,000 per flip
Among 1,429 U.S. zip codes with at least 10 home flips in Q1 2018, there were five where the average gross flipping profit was more than $325,000 per flip: 91356 in Tarzana, California ($425,000); 07307 in Jersey City, New Jersey ($385,000); 90066 in Los Angeles, California ($359,000); 95124 in San Jose, California ($350,000); and 20011 in the District of Columbia ($327,000).
“The D.C. metro area has been a hot spot for home flipping for several years now, and the first quarter of 2018 reflects that,” said Bobby Montagne, CEO of Walnut Street Finance, a fix-and-flip lender based in Fairfax, Virginia. “The area’s high density of homes, stable job market, and strong local economy make fix-and-flip projects especially attractive and sound investments in the D.C. metro area.”
Average time to flip nationwide at 183 days
Homes flipped in Q1 2018 took an average of 183 days to complete the flip, up from an average 179 days for homes flipped in Q4 2017 and unchanged from a year ago.
Among the 136 metro areas analyzed in the report, those with the shortest average days to flip were Mobile, Alabama (117 days); Memphis, Tennessee (139 days); Clarksville, Tennessee (148 days); Phoenix, Arizona (151 days); and Medford, Oregon (152 days).
Metro areas with the longest average days to flip were Provo, Utah (224 days); Naples, Florida (220 days); Salt Lake City, Utah (216 days); Ogden, Utah (216 days); and Boise City, Idaho (214 days).
Five zip codes with an average time to flip under 100 days
Among 1,429 U.S. zip codes with at least 10 home flips in Q1 2018, there were five zips where the average time to flip was less than 100 days: 38141 in Memphis, Tennessee (93 days); 76119 in Fort Worth, Texas (93 days); 85388 in Surprise, Arizona (94 days); 85043 in Phoenix, Arizona (98 days); and 32206 in Jacksonville, Florida (99 days).
“Home flippers have to adapt to the changing market if they want to find inventory,” said Sifakis of Jacksonville-based JWB Real Estate Capital. “In 2017 JWB bought a little over 700 properties, and less than 20 percent came from the MLS (Multiple Listing Service). The rest we had to source ourselves through online marketing, mailers, signage, various local and online auctions, wholesalers, etc. Four years ago, our monthly budget to find homes to flip was $0. Today it is $20,000 a month — and climbing.”
Flipped homes sold to FHA buyers drops to 10-year low
Of the 48,457 U.S. homes flipped in Q1 2018, 15.9 percent were sold by the flipper to a buyer using a loan backed by the Federal Housing Administration (FHA), down from 16.1 percent in the previous quarter and down from 19.2 percent a year ago to the lowest level since Q1 2008.
Among the 136 metro areas analyzed in the report, those with the highest percentage of Q1 2018 home flips sold to FHA buyers — typically first-time homebuyers — were Pueblo, Colorado (32.7 percent); Merced, California (32.7 percent); Ogden, Utah (30.2 percent); Tulsa, Oklahoma (28.8 percent); and Bakersfield, California (28.6 percent).
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.
About ATTOM Data Solutions
ATTOM Data Solutions provides premium property data to power products that improve transparency, innovation, efficiency and disruption in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for more than 155 million U.S. residential and commercial properties covering 99 percent of the nation’s population. A rigorous data management process involving more than 20 steps validates, standardizes and enhances the data collected by ATTOM, assigning each property record with a persistent, unique ID — the ATTOM ID. The 9TB ATTOM Data Warehouse fuels innovation in many industries including mortgage, real estate, insurance, marketing, government and more through flexible data delivery solutions that include bulk file licenses, APIs, market trends, marketing lists, match & append and more.
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