The number of single family homes and condos flipped during 2017 reached its highest level since 2006, according to a report from ATTOM Data Solutions.
ATTOM’s 2017 U.S. Home Flipping Report found that 207,088 U.S. single family homes and condos were flipped in 2017, up 1 percent compared with the 204,167 home flips in 2016.
Homes flipped in 2017 represented 5.9 percent of all single family home and condo sales during the year, up from 5.7 percent of all sales in 2016 to the highest level since 2013, the report found.
ATTOM said 138,410 entities (individuals and institutions) flipped homes in 2017, up 4 percent from the 133,407 entities that flipped in 2016 to the highest level since 2007.
“The surge in home flipping in the last three years is built on a more fundamentally sound foundation than the flipping frenzy that we witnessed a little more than a decade ago,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in a release. “Flippers are behaving more rationally, as evidenced by average gross flipping returns of 50 percent over the last three years compared to average gross flipping returns of just 31 percent between 2004 and 2006 — the last time we saw more than 200,000 home flips in consecutive years.”
“And while financing for flippers has become more readily available in recent years, 65 percent of flippers still used cash to buy homes flipped in 2017, nearly the reverse of 2004 to 2006, when 63 percent of flippers were leveraging financing to buy,” Blomquist added.
The report said the total dollar volume of financed home flip purchases was $16.1 billion in 2017, up 27 percent from $12.7 billion in 2016 to the highest level since 2007. It said flipped homes originally purchased by investors with financing represented 34.8 percent of homes flipped in 2017, up from 31.6 percent in 2016 to the highest level since 2008.
According to the report, the metropolitan statistical areas (MSAs) with the highest percentage of flips with financing in 2017 were Denver (55.4 percent); Boston, (52.8 percent); Providence, R.I. (49.4 percent); San Diego (48.5 percent); and Seattle (48.0 percent).
“Across Southern California, the flipping of investment properties continues to be a challenge, due to low available housing inventory, which is in turn driving up pricing and downsizing profitability for investors,” said Michael Mahon, president at First Team Real Estate, which serves Southern California. “To best position cash available for investment, we are experiencing more investors looking to utilize loan financing as leverage, as opposed to all-cash purchases, in an effort to capture greater numbers of investment opportunities, as opposed to maximizing individual profitability on investment projects.”
The MSAs with the lowest percentage of flips with financing in 2017 were Richmond, Va. (3.7 percent); New York (4.3 percent); Minneapolis-St. Paul (4.9 percent); St. Louis (6.4 percent); and San Diego (10.0 percent).
ATTOM said the MSAs with the highest share of all-cash flips were Providence, R.I. (43.1 percent); Birmingham, Ala. (42.8 percent); Oklahoma City (41 percent); Orlando (40.4 percent); and San Antonio (38 percent).
Home flips in 2017 yielded an average gross profit of $68,143, up 5 percent from an average gross flipping profit of $64,900 in 2016 to a new all-time high for as far back as data is available (2000). ATTOM said the average gross flipping profit in 2017 represented an average 49.8 percent return on investment (ROI).
The MSAs with the highest average gross flipping ROI were Scranton, Pa. (168.2 percent); Pittsburgh (145.5 percent); Baton Rouge, La. (122.9 percent); Philadelphia (115.7 percent); and Erie, Pa. (114.1 percent), ATTOM found. The MSAs with the highest home flipping rate in 2017 were Memphis (12.8 percent); Las Vegas (9.1 percent); Tampa-St. Petersburg (9 percent); Birmingham, Ala. (8.6 percent); and Phoenix (8.5 percent).