Home flips down, but profits reach highest level in at least two decades

While home flipping continued to fall nationwide during 2020’s third quarter, gross profit on home flips grew to the highest level in two decades, according to Attom Data Solutions.

The company’s Q3 2020 U.S. Home Flipping Report revealed that 57,155 single-family homes and condominiums were flipped in the third quarter, a total representing 5.1% of all home sales in that timeframe. That’s down from 6.7% of all home sales in the previous quarter, as well as from 5.5% in the third quarter of last year.

However, as home flips fell, profits and profit margins both grew. Homes flipped in the third quarter were sold for a median price of $240,000, against a median investor purchase price of $166,234. That brought the gross profit on the typical flip — the difference between the median sales price and the median purchase price — up to $73,766.

That’s the largest amount since at least 2000, up from $69,000 in the second quarter and from $61,800 in the third quarter of 2019.

That gross profit translated into a 44.4% return for investors, up quarterly from 42.9% and annually from 40.3%. November’s return is the largest since the first quarter of 2018, when it was 48%.

With the improvement, return on investment on home flips has now grown year to year for two consecutive quarters after falling for nine straight.

“Home-flipping again generated higher profits on less transactions across the United States in the third quarter of 2020 as investors continued to make more money on a declining number of deals,” said Todd Teta, chief product officer at Attom.

“This all happened in the context of the pandemic, which has created unusual circumstances for the housing market to thrive, and that has included the home-flipping business. Too much is uncertain these days to say whether the latest trends will continue. But for now, the prospects continue looking up for home flipping after a period when they were trending the opposite way.”