Home flipping returns drop to nearly 4-year low

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U.S. home flipping returns have dropped to nearly a four-year low in the second quarter of 2018, according to a new report. The report also showed Colorado Springs is one of the cities with the highest share of flips purchased with financing — 66 percent.

ATTOM Data Solutions released its Q2 2018 U.S. Home Flipping Report today, showing homes flipped in the second quarter of 2018 yielded an average gross return on investment of 44.3 percent, down from 47.8 percent in the previous quarter and down from 50.0 percent in Q2 2017.

It is the lowest average gross flipping ROI since Q3 2014.

The report shows a total of 48,768 U.S. single family homes and condos were flipped in the second quarter of 2018, a home flipping rate of 5.2 percent of all sales — down from a 6.6 percent home flipping rate in Q1 2018 and down from a 5.4 percent home flipping rate this time last year.

“Homes flipped in Q2 2018 sold for an average of $65,520 more than what the home flipper purchased them for, down from an all-time high average gross flipping profit of $69,500 in the first quarter and down from an average gross flipping profit of $69,000 a year ago,” the report said. “The average gross flipping profit in the second quarter was the lowest since Q2 2016 — a two-year low.”

The report also showed that 39 percent of home flips nationwide were purchased with financing.

Among U.S. home flips completed in Q2 2018, 38.6 percent were purchased by the home flipper with financing, up from 36.8 percent in the previous quarter but down from a nearly 10-year high of 39.6 percent in Q2 2017.

States with the highest share of flips purchased with financing were Rhode Island (63.8 percent), Colorado (57.1 percent), New Hampshire (53.4 percent), Minnesota (50.2 percent) and Washington (50 percent).

Among 140 metropolitan statistical areas with at least 50 flips in Q2 2018 and a population of at least 200,000, the report found those with the highest share of flips purchased with financing were Fort Collins, Colorado (66.7 percent); Colorado Springs, Colorado (66 percent); Providence, Rhode Island (60.3 percent); Greeley, Colorado (59.6 percent); and Seattle, Washington (54.6 percent).

“It has gotten tougher and tougher to flip homes in the Colorado market. Not only is the competition fierce, but home prices continue to rise,” real estate broker and investor Mark Ferguson said in a release issued by ATTOM Data Solutions. “I flip from 10 to 20 houses at one time, and even though I use financing it takes more money to flip when prices are higher. I have thought about moving to a cheaper market, but I love Colorado and I am doing everything I can to make it work here.

“I used to pay from $50,000 to $100,000 for most of my house flips, and now I am paying $150,000 to $250,000 for my flips with not much more profit. My average profit in the past after all expenses has been around $32,000, and this year it is closer to $40,000.”

The report analyzed 1,451 U.S. zip codes with at least 10 flips during the quarter, and found those with the highest share of flips purchased with financing were 80923 in Colorado Springs (85.7 percent), 85006 in Phoenix, Ariz. (84.6 percent), 98033 in Kirkland, Wash. (84.6 percent), 80525 in Fort Collins (84.2 percent) and 20002 in the District of Columbia (81.8 percent).

The report also showed:

  • the highest gross flipping returns were in Louisiana (102.5 percent), Pennsylvania (100.3 percent) and Ohio (81.4 percent);
  • the highest home flipping rates were in D.C. (8.3 percent), Nevada (7.4 percent) and Tennessee (7.2 percent); and
  • the shortest average time to flip was in New Hampshire (151 days) followed by Arizona (161 days) and Nevada (167 days).

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