Fewer homes were flipped by investors in the second quarter compared with the same quarter one year ago as profits grew smaller, according to ATTOM Data Solutions’ 2019 U.S. Home Flipping Report. Homes flipped in the second quarter were down 5.2% from a year ago. Overall, home flips in the second quarter comprised 5.9% of all home sales during the quarter.
Investors are seeing fewer profits from their flips. Homes flipped in the second quarter generated a gross profit of $62,700—the difference between the median sales price and the median paid by investors, according to ATTOM Data Solutions. That is down 2% from a year ago. The average profit translated into a 39.9% return on investment compared to the original purchase price, down from 40.9% in the first quarter.
“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,” says Todd Teta, chief product officer at ATTOM Data Solutions. “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.”
Dollar Volume Up
The total dollar volume of financed home flip purchases in the second quarter of 2019 was $8.4 billion, up 31.3 percent from $6.4 billion in Q2 2018 to the highest level since Q3 2006. Flipped properties originally purchased by the investor with financing represented 41.0 percent of all home flips in Q2 2019, up slightly from 40.8 percent in the previous quarter, but down from 45.9 percent a year ago.
Many areas are seeing a decrease on returns on investment from flipping. The largest ROI drops in the second quarter were in Raleigh, N.C.; Savannah, Ga.; San Antonio, Texas; Springfield, Mo.; and Baton Rouge, La.
Still, some investors are betting on home flipping in some markets, mostly in the East. Home flipping was the most common—with rates of at least 25%—in the following markets during the second quarter:
Pima County, Ariz.: 85714 (ZIP code) at 32.4% home flipping rate
Cuyahoga County, Ohio: 44110 at 31%
Shelby County, Tenn.: 38109 at 30.1%
Camden County, N.J.: 08083 at 28.6%
Shelby County, Tenn.: 38118 at 28%
Source: REALTOR magazine