Home Flips Increase, Profits Decrease

The first quarter of 2020 brought the highest percentage of home flip sales since the second quarter of 2006, ATTOM Data Solutions found.

The number of flips in the first quarter of 2020 represented 7.5% of all home sales in the U.S. In total, 53,705 single-family homes and condos were flipped, an increase of 1.2% from the fourth quarter of 2019 and up 0.2% year-to-year. It’s important to note that the first quarter was not entirely impacted by the COVID-19 pandemic.

However, the people flipping are bringing in less return on investment than previous quarters. On average, flippers made 36.7% return on investment, the lowest since the third quarter of 2011. That translated to $62,300 on average, which is up $300 from the previous quarter, and up more than $1,600 year-to-year. The median price for homes flipped in the first quarter of 2020 was $232,000.

Due to home prices continuing to rise, flippers are forced to spend more on the initial investment, which is cutting into their profit. In the first quarter of 2019, flippers made 40.9% return on investment comparatively. It took flippers an average of 174 days to finalize their flips, an increase of five days from the last quarter in 2019, but down from 180 days year-to-year.

“Home flipping has gradually taken up a larger portion of the housing market over the last couple of years. But profits are down and are lower than they’ve been since the dark days following the Great Recession, which is a sign that investors aren’t keeping up with price increases in the broader market,” said Todd Teta, chief product officer at ATTOM Data Solutions. “Enter now the Coronavirus pandemic and the prospects for home flipping are notably uncertain, at least in the short term. We should know a lot more in a few months about whether home prices drop and investors get hit hard, or whether they can increase their profit margins.”

Regardless, home flipping saw an increase in 87.1% of the 140 metro areas analyzed for the report. In Pennsylvania, York saw an increase of 71.4% in home flipping from the fourth quarter of 2019.