Home Flipping Hits 10-Year High In 2016

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The Editors's picture
Home flipping hits 10-year high in 2016 http://www.realtytrac.com/news/real-estate-investing/2016-year-end-u-s-home-flipping-report/

Low inventory and a flood of capital pushed the home flipping rate to a 10-year high in 2016, according to a new report from ATTOM Data Solutions.

Homes flipped in 2016 sold for a median price of $189,900, a gross flipping profit of $62,624 above the median purchase price of $127,276 and representing a gross flipping return on investment (ROI) of 49.2 percent. Both the gross flipping dollar amount and ROI were the highest going back to 2000, the earliest home flipping data is available for the report, according to the release.

“Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount,” Daren Blomquist, senior vice president at ATTOM Data Solutions, said in the release.

 “Given that many of these markets are more affordable, we are also seeing a higher share of the flipped homes sold to FHA buyers, with that share reaching a four-year high of 19.6 percent in 2016.

“Home flipping was hot in 2016, fueled by low inventory of homes in sellable or rentable condition along with a flood of capital — both foreign and domestic — searching for the returns and stability available with U.S. real estate,” Blomquist said in the release.

“The combination of more home flips and a greater share of financing for flip purchases resulted in a 19 percent jump in the estimated dollar volume of financing for home flip purchases, up to $12.2 billion for the flips completed in 2016 — a nine-year high.”

The report says 193,009 single family homes and condos were flipped — sold in an arms-length transfer for the second time within a 12-month period — in 2016, up 3.1 percent from 2015 to the highest level since 2006, when 276,067 single family homes and condos were flipped.

Home flips in 2016 accounted for 5.7 percent of all single family home and condos sales during the year, up from 5.5 percent in 2015 to a three-year high but still well below the peak in 2005, when 338,207 single family homes and condos were flipped representing 8.2 percent of all sales.

For this report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80 percent of the U.S. population.

The report also shows that 126,256 entities — including both individuals and institutions — flipped homes in 2016.

Meanwhile, the share of flipped homes that were purchased by the flipper with financing increased to an eight-year high of 31.5 percent in 2016 while the median age of homes flipped increased to 37 years — a new high going back to 2000, as far back as data is available — and the median square footage of homes flipped decreased to 1422 — a new record low going back to 2000.

Home flipping heat map

Home flipping heat map

Metros with  $100,000 gross home flipping profit

Among 117 metropolitan statistical areas with at least 250 home flips in 2016, there were 11 with an average gross flipping profit of $100,000 or more in 2016:

  • San Jose, California ($145,750)
  • Boston, Massachusetts ($140,000)
  • San Francisco, California ($140,000)
  • New York, New York ($127,250)
  • Los Angeles, California ($127,000)
  • San Diego, California ($111,000)
  • Oxnard-Thousand Oaks-Ventura, California ($105,000)
  • Seattle, Washington ($102,000)
  • Vallejo-Fairfield, California ($101,000)
  • Baltimore, Maryland ($100,500)
  • Washington, D.C. ($100,000)

Home flipping profits

Seattle gives home flipping substantial returns

“Our strong wage growth is still supporting rising home prices, which when combined with the historically low number of homes for sale in Seattle, gives home flippers substantial returns on their investments,” Matthew Gardner, chief economist at Windermere Real Estate in Seattle said in the release.

 “I believe flipping serves as a negative for any housing market because it further erodes housing affordability, but if there’s a demand for it in the market, it’s a trend we will continue to see,” Gardner said.

Highest gross flipping returns in Pennsylvania, Ohio and Louisiana metros

Among the 117 metro areas analyzed in the report, those with the highest gross flipping ROI were East Stroudsburg, Pennsylvania (241.5 percent); Pittsburgh, Pennsylvania (130.0 percent); Cleveland, Ohio (116.2 percent); Philadelphia, Pennsylvania (107.1 percent); Toledo, Ohio (102.0 percent); and New Orleans, Louisiana (101.2 percent).

Highest home flipping rates in Tennessee, California and Florida metros

Among 117 metropolitan statistical areas with at least 250 home flips in 2016, those with the highest home flipping rate as a percentage of all home sales were Memphis, Tennessee (11.7 percent); Clarksville, Tennessee (10.1 percent); Visalia-Porterville, California (10.1 percent); Tampa-St. Petersburg, Florida (9.9 percent); and Deltona-Daytona Beach-Ormond Beach, Florida (9.9 percent).

39 zip codes where at least one in five home sales was a flip in 2016

Among 5,625 U.S. zip codes with at least 10 homes flipped in 2016, there were 39 zip codes where at least 20 percent of all home sales during the year were home flips, including zip codes in Texas, Tennessee, Florida, California, Ohio, Virginia, Pennsylvania, Missouri, Washington, the District of Columbia, Maryland, New York and New Jersey.

Hottest home flipping zips

In the Los Angeles metro area, which accounted for six of the 39 zip codes with a home flipping rate of at least 20 percent in 2016, the best opportunity for flipping is in lower-priced neighborhoods with properties that need significant repairs, according to Brett Chotkevys, co-founder of Helpful Home Solution, which flips properties in Los Angeles and other parts of Southern California.

“We do pretty much a full gut on the houses we buy. Most of those we buy are pretty nasty … they’re falling down, there are druggies living there,” said Chotkevys, noting that a typical rehab for his LosAngeles flips will run $40,000 to $50,000, and it’s not “inconceivable” for him to spend six figures on a Los Angeles fix-and-flip. “We like south central (Los Angeles) a little bit more. The barrier to entry is lower. We can pick up properties in the 200s. … There are normal people not making gobs of money that can afford to buy these houses.

“With us being where we are in the cycle, and us being very near the top, we’re not buying any big properties, anything close to a million, and trying to flip those,” Chotkevys added.

About ATTOM Data Solutions
ATTOM Data Solutions is the curator of the ATTOM Data Warehouse, a multi-sourced national property database that blends property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property characteristic data for more than 150 million U.S. residential and commercial properties. The ATTOM Data Warehouse delivers actionable data to businesses, consumers, government agencies, universities, policymakers and the media in multiple ways, including bulk file licenses, APIs and customized reports.

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