A recent report from ATTOM Data Solutions about national flipping trends stated that about one in every 10 homes in Phoenix, Arizona metro area market is a flip.  Only five markets posted higher numbers than this.

Even though Phoenix is a hot spot for flippers, it is not necessarily a hot spot for high returns. Homes flipped in Phoenix grossed an average of 22%, while the national flipping average is 48%. Daren Blomquist, vice president of communications at ATTOM Data Solutions, attributes this lower profit margin to something he refers to as “iBuyers.”

“We’re seeing what I would call large-scale home-flippers [iBuyers] who have a different business model than your typical mom-and-pop home flipper coming into Phoenix,” Blomquist observed. “Phoenix is seen as [a] great market to operate in. It has a lot of characteristics that make it ideal for home-flipping.”

iBuyers are able to operate on narrower margins than individual flippers because they do hundreds of thousands of transactions in a market. “I would suspect they are making maybe around $10,000 to $15,000 per flip in net profit,” Blomquist said. The average gross on a flip in Phoenix is $41,913, nearly $30,000 less than that national average.

Home Flipping Could be Getting Tougher

Blomquist also noted the 2018 market is a “double-edged sword for home flippers [because] rising home prices boosted by low available inventory of homes for sale or rent are padding profits at the back end when flippers sell, but those same market realities are eroding flipping returns at the front end.”

These falling margins may be the reason for the decline in flipping in many major markets. 75 of the 136 metro areas analyzed in the ATTOM report posted year-over-year decreases in home-flipping rates.

3 Cities Where Flipping is on the Decline:
  • Miami, Florida (down 16%)
  • Tampa-St. Petersburg, Florida (down 13%)
  • Washington, D.C. (down 6%)
Categories | Article | Market & Trends
  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

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