IRVINE, Calif. – Dec. 8, 2016 – ATTOM Data Solutions’ Q3 2016 U.S. Home Flipping Report finds an overall drop in the percentage of homes being flipped. ATTOM defines a home flip as a property sold in an arms-length sale for the second time within a 12-month period.
Florida saw a fair share of that declining number of home flips, however, with four metro areas making ATTOM’s top 10 list of “markets with the highest flipping rate.”
Among 92 metropolitan statistical areas with at least 90 homes flipped in Q3 2016, those with the highest flipping rate were:
1: Memphis (11.0 percent)
2: Clarksville, Tennessee (9.5 percent)
3: Deltona-Daytona Beach-Ormond Beach (9.3 percent)
4: Tampa-St. Petersburg (9.3 percent)
5: Visalia-Porterville, California (9.3 percent)
6: York-Hanover, Pennsylvania (9.2 percent)
7: Lakeland-Winter Haven (9.0 percent)
8: Fresno, California (8.7 percent)
9: Miami (8.6 percent)
10: Las Vegas (8.2 percent)
“While the macro trends of low housing inventory and rising home prices are favorable for flippers, they are also a double-edged sword, attracting more competition and reducing the availability of deals – particularly in the most fundamentally sound local markets,” says Daren Blomquist. “This is chasing some investors into markets and neighborhoods that may be less fundamentally sound but also offer more value-add opportunities for flippers in the form of aging housing inventory.”
Home flipping profits
Homes flipped in Q3 2016 sold on average for $190,000, with an average gross flipping profit of $60,800 more than the average purchase price of $129,200. That’s down from an average gross flipping profit of $62,424 in the previous quarter, which was the highest going back to Q1 2000, the earliest historical data available in the report.
The average gross flipping profit represented an average gross return on investment (ROI) of 47.1 percent of the purchase price, down from an average gross flipping ROI of 49.5 percent in the previous quarter and down from 47.9 percent a year ago.
“While the high-level gross flipping profits are impressive, it’s important to note that they do not include all the costs incurred by flippers, including rehab, financing, property taxes and other carrying costs,” Blomquist says.
“It’s also important to note that the overall averages mask the fact that not every flip ends profitably for the investor,” Blomquist adds. “About 8 percent of the homes flipped in the third quarter actually sold for less than what the flipper purchased them for, and about 21 percent of the flips yielded a gross flipping ROI below 10 percent – likely meaning the flipper walked away with a net loss on the deal.”
Of all homes flipped in Q3 2016, the flipper bought the property at an average 25.2 percent discount below full “after repair” market value, and he sold the property for a 6.7 percent premium above market value.
• Homes flipped in Q3 2016 took an average of 180 days to flip, down from a 10-year high of 185 days in the previous quarter, but still up from an average 176 days a year earlier.
• Flippers sold 53 percent of all homes in Q3 2016 for $200,000 or less; 33 percent were sold for between $200,000 and $400,000. Homes flipped for $500,000 or more accounted for less than 9 percent of all flips during the quarter, and homes flipped for $1 million or more accounted for less than 2 percent.
• Flipped homes sold by the flipper for between $50,000 and $200,000 yielded an average gross flipping ROI of 58 percent, the highest among price ranges in the third quarter. Homes flipped for between $2 million and $5 million yielded an average gross flipping ROI of 26 percent, the lowest among price ranges for the quarter.
Source: Florida Realtors®