After home-flipping profits slipped over the past few months, the home-flipping market continues to see a drop in returns.
However, activity continues to increase. According to a new report from ATTOM Data Solutions home flipping in the U.S. has increased to an eight-year high in 2019, yet returns have dropped to an eight-year low.
In 2019 alone, there were $32.5 billion financed flips, up a whopping 21% from 2018. This means there were 245,864 single-family homes and condos in the U.S. flipped in 2019.
“Home-flipping profits across the U.S. dropped again in 2019 as the business of buying and selling houses absorbed its worst year since the housing market was mired in the fallout from the Great Recession,” said Todd Teta, chief product officer at ATTOM Data Solutions. “This happened as the cost of buying properties continued to rise faster than gains on resale.”
“That’s not to say that the home-flipping industry is tanking or losing its allure for investors because home flipping rates are higher than they’ve been in eight years. But profits did continue to decline again for investors,” Teta continued.
ATTOM has also said 56,566 U.S. single-family homes and condos were flipped in the third quarter of 2019, down 12.9% from the previous quarter and down 6.8% from a year ago. These drops marked the largest quarterly and annual drops since the third quarter of 2014.
The number of flipped homes last year represented 6.2% of all home sales in the nation during that year, making it an eight-year high.
Although flipping activity rose, profit margins dropped. Homes that were flipped in 2019, on average, generated a gross profit of $62,900 nationwide, down by 3.2% from $65,000 in 2018 and 6% from the post-recession peak of $66,899 in 2017, ATTOM reported.
A typical gross flipping profit of $62,900 also means flippers received a 40.6% return on investment compared to the original acquisition price. This is down from a 45.8% gross flipping ROI in 2018 and down from 51.4% ROI in 2017.
In 64% of local markets, home flipping rates increased from 2018 to 2019, with the largest in Laredo, Texas, up a whopping 103.5%.
Meanwhile, there were 34 counties with a flipping rate of at least 10%, and nine ZIP codes had a home flipping rate of at least 25%.
Consequently, home flips purchased with financing saw a decline, while homes bought with cash went up.
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