Home flipping rate finally up after more than a year — but returns fall to recent low

After more than a year of decline, the rate of home flips in the United States finally saw a rebound during the second quarter, comprising 4.9% of all home sales — approximately one out of every 20 — during the period.

That’s according to Attom Data Solutions, which reported that Q2’s rate was up from 3.5%, or one in every 29 sales, during the preceding quarter. If home flipping is going to rebound from its pandemic-era slump, that’s at least a start, though the home flipping rate remains down year over year (from 6.8% in Q2 2020) and is still below the pace seen throughout most of the past decade, per Attom.

With home prices steadily on the rise, gross profit on the typical home flip nationwide grew. That figure reached $67,000 during 2021’s second quarter, up 2.4% quarterly and 3.1% annually. But profit margins dipped, with flippers realizing just a 33.5% return on investment (ROI) compared to their original acquisition price. That’s down from 37.2% during Q1 and from 40.6% in Q2 last year, falling to the lowest ROI since the first quarter of 2011. Moreover, the drop of 7.1 percentage points year over year is the largest annual drop in flipping profit margins since mid-2014, Attom reported.

“Home flipping rebounded during the second quarter. But profits sure didn’t, as the typical home flip around the country netted the smallest return on investment in a decade,” said Todd Teta, chief product officer at Attom. “However, it’s not like home flipping has become a losing proposition. A 33% profit on a short-term investment remained pretty decent, even after renovation and holding expenses.

“But with a few more periods like the second quarter of this year, investors may need to reframe how they look at these deals,” Teta continued.

The fall in returns came thanks to moderating home price growth, as sale prices on flipped homes rose more slowly than they did when the investors first brought the properties to flip. Consider that the median price of flipped homes in the second quarter was $267,000 — an all-time high, up 10.6% quarter to quarter and 18.7% year to year. But when investors originally bought the homes they planned on flipping, they absorbed increases of 13.6% quarterly and 25.0% annually. With prices simply increasing faster on purchase than they did on resale, investors found their profit margins on the downswing.


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