Real Estate

Home flipping is flopping

Returns are nearing a 7-year low

Despite what some HGTV shows would have you believe, home-flipping activity is not at its most profitable right now.

According to ATTOM Data Solutions’ third-quarter 2019 U.S. Home Flipping Report, the latest returns on home flips stood at the second-lowest point since 2011.

“After a springtime selling binge earlier this year, the home-flipping business settled way down over the summer amid a continuing scenario of languishing profits,” said Todd Teta, chief product officer at ATTOM Data Solutions.

“The retreat back to more normal levels of sales comes amid broader market forces that are making it harder and harder for investors to complete the kinds of deals they were getting as recently as last year,” Teta added. “Those forces are keeping profits way down from post-Recession highs and show no signs of easing.”

According to the report, 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. 

And it wasn’t just activity that was declining – returns on investment, as Teta pointed out, are down as well. While home flipped during this period average a gross profit of almost $65,000, up 3.5% from a year ago, that wasn’t enough to keep up with initial home prices. 

According to the report, the average gross profit “translated into a 40.6% return on investment compared to the original acquisition price, down from a 41.1% gross flipping ROI in the second quarter of 2019 and down from a margin of 43.5% in the third quarter of 2018.”

But it’s not bad news for everyone.

Home flippers in the following five markets are doubling their money: Pittsburgh; Scranton, Pennsylvania; Flint, Michigan; Cleveland and Hickory-Lenoir-Morganton, North Carolina. 

However, if you’re looking to flip a home in Raleigh, North Carolina; Austin, Texas; Phoenix; Las Vegas or Kansas City, Missouri, you can expect the smallest ROI of all U.S. cities with populations above 1 million. 

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