Investors are increasingly shying away from flipping the homes they buy due to a slowdown in the potential gains they can make.
The average home flipper has seen their returns fall to a 6.5 year low in the most recent quarter, while the share of transactions that were flips fell by 12 percent, according to data from ATTOM Data Solutions.
ATTOM’s most recent report for the third quarter shows that 45,901 single family homes and condos were flipped in the period, which is the lowest since Q1 of 2015. That number accounted for just 5 percent of all the homes and condos sold during the quarter.
“Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “We’ve now seen three consecutive quarters with year-over-year decreases in home flips.”
Blomquist added that the last time this occurred was in 2014, following a jump in mortgage rates during the second half of 2013.
Home flipping is still quite profitable, as the average home that was flipped during Q3 sold for $63,000 more than the investor originally paid for it. However, that’s still some way off the $68,000 average profit margin seen in the first quarter.
The metro areas (with populations of at least 200,000) that posted the highest average gross flipping returns in the third quarter were: Pittsburgh (136.7%); Cleveland (120.2%); Atlantic City, N.J. (110.3%); Scranton, Pa. (109%); and Philadelphia (107.9%).
The metros with the overall highest home flipping rates in the third quarter were: Memphis, Tenn. (10.4%); Atlantic City, N.J. (9.1%); Phoenix (8.6%); Las Vegas (7.8%); and Huntsville, Ala. (7.5%).