One area of the real estate market that didn’t have a hugely successful 2020 was house flipping.
While profits grew, the number of flips and profit margin dropped. According to ATTOM Data Solutions, home flipping dropped 13.1% in 2020 from 2019. With 241,630 single-family homes and condos flipped in 2020, these sales represented 5.9% of all home sales last year, down from 6.3% the previous year. This is the first time since 2014 that both homes flipped and sellers represented by investors has dropped.
However, those flippers who were successful did see growth in the amount of profits, but there was an overall decrease in profit margin. Last year, homes flippers saw an average of $66,300 gross profit nationwide per home, up from $62,166 in 2019, and the highest since 2005. However, due to an increase in home prices in 2020, the percentage of return on investment was lower, representing 40.5%, a decrease of 1% from 2019 and nearly 5% from 2018. Additionally, the rate home prices rose in between investors flipping slowed, narrowing their percentage gain.
“Last year was a banner year for the U.S. housing market, with the apparent exception of the home flipping business, which saw its fortunes slide a bit more in 2020. Home flippers did still make a nice profit on investments that generally take around six months to turn around – just not as much as they did in the previous few years,” said Todd Teta, chief product officer at ATTOM Data Solutions. “It’s too early to know if that small slide was a sign of weakness in the broader housing market or just a bump in the road. We will know much more as we gauge other key market metrics in the coming months.”
Investors in major cities either took a step back or were unable to obtain properties to flip, as data shows home flipping rates were down 64% in the metro areas analyzed. Flippers also saw a bigger gap to complete the flips; home flips took 181 days on average to complete, up four days from 2019.