Home Flipping Gains In Popularity But Lose Some Profit

Home flipping is gaining in popularity even as profits continue to fall, according to the latest quarterly report from ATTOM Data Solutions…(ATTOM)

• Q-O-Q: A total of 94,766 single-family houses and condominiums were flipped in the third quarter. This represented 5.7% of all home sales in Q3 which is an increase from 5.1% in Q2.

• Y-O-Y: A total of 57,155 homes were flipped in Q3 2020, but that represented 5.1% of all home sales which is only 0.6 percentage points less than Q3 2021.

Flipping is getting more popular and more expensive, but profit margins are shrinking…

Q-O-Q: The typical gross-flipping profit of $68,847 in the third quarter translated into just a 32.3% return on investment. This is down from 33.2% in the second quarter.

Y-O-Y: The typical gross flipping profit in Q3 of 2020 were $73,766 which translated into a 44.4% ROI, 12.1% percentage-points higher than in Q3 of 2021.

Low inventory levels are helping home flippers sell at a pace not seen since 2010…

• Home flippers took an average of 147 to complete the transaction in the third quarter which is the smallest turnaround time since the third quarter of 2010.

• This is down from the 148 day average in Q2 and down significantly from the 192 day average in Q3 2020.

Todd Teta, chief product officer at ATTOM, wondered if profit-margins continue decline will possibly deter some current and possible flippers…

“It’s clear that declining fortunes weren’t enough to repel investors amid a typical scenario of 32 percent profits before expenses on deals that usually take an average of five months to complete. We will see over the coming months whether the amount they can make on these quick turnarounds will still be enough to keep luring them into the home-flipping business or start pushing them elsewhere.”