YTD 2017 Home Flips Still on Pace to Equal 10-Year High of 2016; Lowest Ratio of Flips Per Investor Since Q2 2008
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.
“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) and Charlotte, North Carolina (up 15 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) and Indianapolis, Indiana (up 35 percent).
ATTOM Data Solutions