“Home flipping keeps getting less and less profitable, which is another marker that the post-recession housing boom is softening or may be coming to an end." - Todd Teta, chief product officer at ATTOM
As autumn settles in around the United States, fix-and-flip investors are hoping to bounce back from a rough summer, according to a report from real estate analytics firm ATTOM Data Solutions.
In the second quarter of 2019, investors flipped about 59,900 U.S. single-family homes and condos, up 12.4 percent from the previous quarter, but down 5.2 percent from a year ago, according to ATTOM’s most-recent Home Flipping Report
During the same period, investors netted an average gross profit of about $62,700 in Q2 2019, which is roughly a 39.9 percent return on investment compared to the original acquisition price, ATTOM found. That return rate is down from 40.9 percent gross flipping returns in the first quarter of 2019 and 44.4 percent in the second quarter of 2018.
In total, homes flipped in the second quarter represented 5.9 percent of all home sales during the quarter, down from 7.2 percent in the previous quarter, but up from 5.4 percent a year ago.
More broadly though, fix-and-flip investments are down. Profits on home flips have now dropped six quarters in a row, and eight of the last 10 quarters, which is the lowest level since the fourth quarter of 2011, according to ATTOM.
“Home flipping keeps getting less and less profitable, which is another marker that the post-recession housing boom is softening or may be coming to an end,” said Todd Teta, chief product officer at ATTOM. “Flipping houses is still a good business to be in and profits are healthy in most parts of the country. But push-and-pull forces in the housing market appear to be working less and less in investors’ favor. That’s leading to declining profits and a business that is nowhere near as good as it was a few years ago.”
Of the 149 markets with at least 50 or more flips in the second quarter of 2019 and a population greater than 200,000 people, those with the smallest gross flipping profits were Montgomery, Alabama (profit of $23,250); Raleigh, North Carolina ($24,000); Springfield, Missouri ($27,025); San Antonio, Texas ($27,117) and Savannah, Georgia ($28,900).
Among the 149 metros analyzed in ATTOM’s report with at least 50 home flips in the second quarter of 2019, five areas had gross profits that doubled investors’ money. Such locales included Scranton, Pennsylvania (134 percent); Pittsburgh, Pennsylvania (132.5 percent); Reading, Pennsylvania (129.3 percent); Kingsport, Tennessee (104.1 percent) and Augusta, GA (101.1 percent).
Despite some of the troubling trends for flippers, lenders are still dishing significant financing their way. In the second quarter of 2019, the total dollar volume of financed home flip purchases was $8.4 billion — which is an increase of 31.3 percent from $6.4 billion in the second quarter of 2018. It’s also the highest level of financing since the third quarter of 2006.
For more information, check out ATTOM’s full report here