Boost in home-flipping rates fails to push profits and returns

by Candyd Mendoza11 Jun 2019

Home flipping climbed to its highest rate for the ninth year in a row while returns dropped to a nearly eight-year low.

During the first quarter, 49,059 single-family homes and condos were flipped, according to ATTOM Data Solutions’ US Home Flipping Report. The number of flipped homes rose 2% from the last quarter and 8% from the past year.

Flips represented 7.2% of all home sales during the quarter, up from 5.9% in the last quarter a year ago and up from 6.7% the prior year.

Homes flippers saw their return on investments (ROI) plunge from an average gross flipping ROI of 42.5% in the previous quarter to 38.7%. The homes flipped were sold for a median price of $215,000 – an average gross profit of $60,000 in Q1 2019, down from $62,000 in Q4 2018 and $68,000 in Q1 2018.

"With interest rates dropping and home price increases starting to ease, investors may be getting out while the getting is good before the market softens further," said Todd Teta, chief product officer at ATTOM. "While the home-flipping rate is increasing, gross profits and ROI are starting to weaken, and the number of investors that are flipping is down 11% from last year. Therefore, if investors are seeing profit margins drop, they may be acting now and selling before price increases drop even more.”