Home Flipping Declines But Profits Rebound Across U.S. In Second Quarter Of 2020
IRVINE, Calif., Sept. 17, 2020 /PRNewswire/ -- ATTOM Data Solutions, curator of the nation's premier property database and first property data provider of Data-as-a-Service (DaaS), today released its second-quarter 2020 U.S. Home Flipping Report showing that 53,621 single-family homes and condominiums in the United States were flipped in the second quarter. Those transactions represented 6.7 percent of all home sales in the second quarter of 2020, or one in 15 transactions. That figure was down from 7.5 percent of all home sales in the nation during the prior quarter, or one in 13, but up from 6.1 percent, or one in 17 sales, in the second quarter of last year.
While the home-flipping rate dropped from the first to the second quarter, both profits and profit margins rose. The gross profit on the typical home flip nationwide (the difference between the median sales price and the median paid by investors) increased in the second quarter of 2020, to $67,902. That was up from $63,000 in the first quarter of 2020 and from $61,900 in the second quarter of last year.
The increase pushed profit margins up, with the typical gross flipping profit of $67,902 in the second quarter translating into a 41.3 percent return on investment compared to the original acquisition price. The gross flipping ROI was up from 38.9 percent in the first quarter of 2020 and 40.4 percent a year earlier. The improvement in the typical ROI marked the first quarterly increase since the third quarter of 2018 and the first year-over-year gain since the fourth quarter of 2017.
The opposing trends – the flipping rate down but profits up – came as the worldwide Coronavirus surged across the U.S., hurting sales but not prices. Home sales sank amid a combination of social distancing aimed at slowing the spread of the virus and rising unemployment connected to the pandemic's economic impact. Yet prices rose in significant parts of the country as home seekers able and willing to take advantage of historically low mortgage rates ventured into the market and competed for a reduced supply of homes for sale.
"Home flipping was a study in contrasts in the second quarter of 2020, as the flipping rate went one way and profits went the other," said Todd Teta, chief product officer at ATTOM Data Solutions. "Far fewer house hunters were out in the market looking for homes, which probably cut into the pool of potential buyers that investors could tap. But at the same time, home flippers who were able to close deals did better than they had done in a year and a half. That likely flowed in large part from extremely low interest rates that enticed buyers who remained employed and were willing to house-hunt within social distancing requirements."
Home flipping rates down in three quarters of local markets
Among those metro areas, the largest quarterly decreases in the home flipping rate came in Durham, NC (rate down 40.7 percent); Provo, UT (down 36.6 percent); Boston, MA (down 35.1 percent); Denver, CO (down 33.7 percent) and Salt Lake City, UT (down 32 percent).
Aside from Boston, Denver and Salt Lake City, the biggest quarterly flipping-rate decreases in 53 metro areas with a population of 1 million or more were in Minneapolis, MN (rate down 27.6 percent) and Indianapolis, IN (down 26.5 percent).
The biggest increases in home-flipping rates were in Salisbury, MD (rate up 45.8 percent); Fort Myers, FL (up 20.2 percent); Tallahassee, FL (up 16.8 percent); Corpus Christi, TX (up 14.1 percent) and Kennewick, WA (up 12.6 percent).
Typical home flipping returns up in almost two-thirds of markets
Profit margins increased from the second quarter of 2019 to the second quarter of 2020 in 95 of the 151 metro areas with enough data to analyze (62.9 percent). The biggest gains were in Fort Collins, CO (return on investment up 167 percent); Johnson City, TN (up 115 percent); Cedar Rapids, IA (up 100 percent); Youngstown, OH (up 92 percent) and Chattanooga, TN (up 91 percent).
Among metro areas with a population of at least 1 million, the biggest increases were in Milwaukee, WI (ROI up 77 percent); San Francisco (up 64 percent); Rochester, NY (up 62 percent); San Jose, CA (up 56 percent) and San Antonio, TX (up 46 percent).
The biggest year-over-year declines in investment returns during the second quarter of 2020 were in Myrtle Beach, SC (ROI down 69 percent); McAllen, TX (down 57 percent); Toledo, OH (down 53 percent); Manchester, NH (down 46 percent) and Jacksonville, FL (down 42 percent).
Investors sold for at least double their purchase price in just six percent of markets
Those markets were led by Hickory, SC (143.3 percent return, up from 82.4 percent in the second quarter of 2019); Pittsburgh, PA (135.6 percent return, up from 132.4 percent a year ago); Youngstown, OH (125 percent return, up from 65.1 percent a year ago); Springfield, IL (115.1 percent return, up from 79.4 percent a year ago) and Chattanooga, TN (105.4 percent return, up from 55.2 percent a year ago).
The smallest second-quarter 2020 profit margins on typical sales were in Raleigh, NC (11.8 percent, down from 13.8 percent in the second quarter of 2019); Myrtle Beach, SC (12.3 percent, down from 40 percent a year ago); Boise, ID (15.4 percent, down from 16.3 percent a year ago); Las Vegas, NV (18.4 percent, up from 15.2 percent a year ago) and Greeley, CO (18.5 percent, down from 25.9 percent a year ago).
Raw profits remain highest in the West and Northeast, lowest in the South
Eighteen of the smallest 25 profits, in dollars, were spread across southern metro areas, led by Myrtle Beach, SC ($22,250 profit); Raleigh, NC ($27,250); Killeen, TX ($29,375); Lubbock, TX ($29,987) and McAllen, TX ($36,625).
Home flips purchased with financing rise while portion bought with cash dip
Among metropolitan statistical areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flips purchased with financing in the second quarter of 2020 were Seattle, WA (61.5 percent); San Diego, CA (58.1 percent); San Francisco, CA (55.6 percent); Virginia Beach, VA (50.7 percent) and Hartford, CT (49.7 percent).
Average time to flip nationwide increases to 183 days
Percent of flipped homes sold to FHA buyers increases to highest level in three years
Among the 151 metro areas with a population of at least 200,000 and at least 50 home flips in the second quarter of 2020, those with the highest percentage of home flips sold to FHA buyers — typically first-time homebuyers — were McAllen, TX (32.4 percent); Stockton, CA (32.3 percent); Bakersfield, CA (31.8 percent); Visalia, CA (31.6 percent) and El Paso, TX (29.4 percent).
Eighty-nine counties had a home flipping rate of at least 10 percent
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SOURCE ATTOM Data Solutions