It may have been one of the hottest summers on record, but not for real estate investors flipping homes.
U.S. home flipping was down about 12 percent in the third quarter of 2018 when compared to the same period in 2017, according to an analysis by ATTOM Data Solutions, a nationwide real estate data provider.
A total of 45,901 single-family homes and condos were flipped in the third quarter of 2018, down from about 51,400 homes flipped in the third quarter of 2017. That total is a 3 .5 year low, according to ATTOM.
Homes flipped in the summer months of 2018 represented 5 percent of all single-family home and condo sales during the quarter — down from a 5.1 percent home flipping rate in the third quarter of 2017. That percentage is the lowest level since the third quarter of 2016.
“Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending,” said Daren Blomquist, senior vice president at ATTOM. “We’ve now seen three consecutive quarters with year-over-year decreases in home flips. The last time that happened was in 2014 following the mortgage rate jump in the second half of 2013, but it’s still far from the 11 consecutive quarters with year-over-year decreases in home flips extending from Q2 2006 through Q4 2008 and leading up to the last housing crash.”
Returns take a hit
In conjunction with the third quarter flipping slowdown, average returns on the investments have dipped as well.
Homes flipped in the third quarter of 2018 sold for an average of $63,000 more than what the home flipper purchased them for, which is down from an all-time high average gross flipping profit of $68,000 in the first quarter of 2018. Average gross profits are also down when compared to the third quarter of 2017, which saw an average gross profit of $65.000.
Nearly one-third — 31.6 percent — of homes flipped in the third quarter sold between $100,000 and $200,000, according to the report. Flipped homes that sold between $200,000 and $300,000 comprised about a quarter of all flipped sales. Flipped homes sold for more than $5 million saw the highest gross flipping return on investment of any price range, netting an average of 187 percent on their investments.
Where flipping is hot
States with the highest average gross flipping returns over the summer were Pennsylvania (96.7 percent), Ohio (90.4 percent), Kentucky (84.7 percent), Louisiana (82.4 percent), and Michigan (78.6 percent).
Arizona netted the highest home flipping rate among all states in the third quarter with 7.7 percent, followed by Tennessee (7.5 percent), Nevada (7.2 percent), Alabama (6.6 percent), and Maryland (6.0 percent).