The latest industry numbers are out from the real estate data experts at ATTOM DATA Solutions, and according to their Q2 2019 U.S. Home Flipping Report house flipping is on the rise, and some fix-and-flip markets are seeing an average gross ROI surpassing 100%. However, when it comes to market competition, average number of days it takes to complete a flip, and average return on investment, it's a bit of a mixed bag for house flippers--depending on where in the country they intend to invest.
Number of U.S. Homes Flipped in Q2 2019 up 12%
According to ATTOM, the Q2 2019 data show a 12% rise in the number of U.S. homes flipped since the previous quarter, with investors averaging 39.9% gross ROI--down 5.2% from the same time last year. Homes flipped in Q2 2019 generated an average gross profit (the difference between the median sale price and median acquisition cost) of $62,700.
More than 100 of the nearly 150 cities ATTOM Data analyzed saw increases in the number of flips. Raleigh, North Carolina experienced a 72% increase in home flipping, while nearby Charlotte rose 54%. Atlanta and San Antonio were both up 46% and Tucson increased 43%. Notably, some of the markets with the highest increase in flips also experienced the lowest average gross profits--with, for example, Raleigh showing an average gross ROI of 10.9% and San Antonio, 15.6%.
Not every market with a marked increased in fix-and-flip investing experienced lower profits. Flipping reached new peaks in Pittsburgh, Pennsylvania, and the average gross ROI there surpassed 132%.
"Flipping Houses is Still a Good Business to Be In"
Although home flipping remains a popular entrepreneurial endeavor, according to Todd Teta, chief product officer at ATTOM, “Home flipping keeps getting less and less profitable, which is another marker that the post-recession housing boom is softening.” Despite shrinking profit margins, Teta believes the industry remains in an overall healthy state. “Flipping houses is still a good business to be in and profits are healthy in most parts of the country, Teta said. "But push-and-pull forces in the housing market appear to be working less and less in investors’ favor. That’s leading to declining profits and a business that is nowhere near as good as it was a few years ago.”
Select U.S. Markets Experiencing Impressive ROI
Fix-and-flip investors have seen impressive average gross ROI with their home flips in five U.S. markets, including
- Scranton, Pennsylvania -- 134%
- Pittsburgh, Pennsylvania -- 132.5%
- Reading, Pennsylvania -- 129.3%
- Kingsport, Tennessee -- 104.1%
- Augusta, Georgia -- 101.1%.
U.S. Markets with the Lowest Average ROI
Fix-and-flip markets with the lowest average gross ROI came in at under 18%, including
- Raleigh, North Carolina -- 10.9%
- Las Vegas, Nevada -- 15.2%
- Phoenix, Arizona -- 15.3%
- San Antonio, Texas -- 15.6%
- San Francisco, California -- 17.1%.
Average Flip Turnaround Time Nationwide is About 6 Months
The average turnaround time for U.S. home flips in Q2 2019 was 184 days, compared to 180 days in the previous quarter, and not far from last year's average of 183 days.
The market with the shortest average turnaround time was Memphis, Tennessee, where it took 137 days on average to flip a home. Crestview-Fort Walton Beach-Destin, Florida came in at the other extreme end, with home flips taking an average of 239 days.
Number of Investors Using Fix-and-Flip Financing Hits a 13-Year High
Fix-and-Flip lending volume rose 31% from last year, with the total value of homes flipped with borrowed capital hitting $8.4 billion in Q2 2019, a 13-year high. This is the highest amount financing has reached since Q3 2006.
Salt Lake City, Utah saw the highest percentage of financed house flips, at 93.7%.
Over 1.5 Million Vacant U.S. Homes in Q3 2019
Another recent ATTOM report, Q3 2019 Vacant Property and Zombie Foreclosure Report reveals there were over 1.5 million (1,530,563) U.S. single-family homes and condos vacant in the third quarter of 2019, representing 1.6 percent of all homes. These vacant properties may represent a ripe field for fix-and-flip investors.
“The blight of vacant, decaying properties facing foreclosure has declined dramatically across the United States--another good-news offshoot of the housing boom that’s gone on for eight years,” Teta said.
The supply of homes for sale, especially lower-priced houses, has remained extremely low for several years. Overall supply is down over 2% annually, according to the latest report from the National Association of Realtors. The inventory shortage is causing price increases, after cooling a bit earlier in the year.
As 2019 draws to a close, fix-and-flip investors face a competitive market in the coming year, where investors of every level of expertise will rely on their preparation and skill to succeed in this industry. The profitable properties are still out there, though it may be more challenging to find and acquire them.
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