Home Flipping
ATTOM: Home flipping hit an 11-year high in 2017
IRVINE, Calif. – March 8, 2018 – ATTOM Data Solutions' Q4 and Year-End 2017 U.S. Home Flipping Report found that home flipping was up 1 percent year-to-year in 2017 and hit an 11-year high.
The 207,088 homes flipped in 2017 represented 5.9 percent of all single-family home and condo sales during the year, an increase from 5.7 percent of all sales in 2016.
A handful of Florida cities ranked high for flips in 2017. According to the report:
* Orlando ranked fourth in total number of completed flips in 2017
* Three Florida cities ranked in the top 10 for home flipping rates: Tampa-St. Petersburg, Miami and Orlando
* Miami (home flipping rate down 14 percent year-to-year) was one of 19 large metro areas (out of 52) to see its home-flipping rate decrease in 2017
* Naples, at 215 days, ranked fifth in the length of time it takes to flip a home
"The surge in home flipping in the last three years is built on a more fundamentally sound foundation than the flipping frenzy that we witnessed a little more than a decade ago," says Daren Blomquist, senior vice president at ATTOM Data Solutions. "Flippers are behaving more rationally, as evidenced by average gross flipping returns of 50 percent over the last three years compared to average gross flipping returns of just 31 percent between 2004 and 2006 – the last time we saw more than 200,000 home flips in consecutive years."
Blomquist says that financing is easier to get for flippers now, but "65 percent of flippers still used cash to buy homes flipped in 2017, nearly the reverse of 2004 to 2006, when 63 percent of flippers were leveraging financing to buy."
"We aren't surprised that the dollar volume and share of financed flips are hitting new highs," says Matt Humphrey, co-founder and CEO of LendingHomes. "Online lenders like us exist because banks and large lenders don't play in this space, and they aren't using technology to be efficient, nimble and fast. Now that investors have digital-native lenders catering to them, financing becomes an attractive alternative to cash. We predict this trend will continue because 2018 is already off to an incredible start for us."
Of the homes flipped in 2017, 17.6 percent were sold to FHA borrowers – likely first-time homebuyers – down from 19.4 percent in 2016 to a three-year low.
"We are seeing an entirely new category of sellers on Roofstock made up of investors choosing to buy/fix/lease/sell with a tenant in place versus buy/fix/flip vacant via the MLS," says Gary Beasley, CEO and co-founder at Roofstock, an online marketplace for investment properties. "This allows home flippers to reduce their selling costs, earn income during their hold period rather than having carrying costs, and potentially turn their capital faster."
Among the 52 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to all-cash buyers — often other real estate investors — in 2017 were Providence, Rhode Island (43.1 percent); Birmingham, Alabama (42.8 percent); Oklahoma City, Oklahoma (41.0 percent); Orlando, Florida (40.4 percent); and San Antonio, Texas (38.0 percent).
Average home flipping returns pull back from all-time high
Completed home flips in 2017 yielded an average gross profit of $68,143 (difference between median purchase price and median flipped sale price), up 5 percent from an average gross flipping profit of $64,900 in 2016 to a new all-time high for as far back as data is available (2000).
The average gross flipping profit of $68,143 in 2017 represented an average 49.8 percent return on investment (ROI, percentage of original purchase price), down from an all-time high average gross flipping ROI of 51.9 percent in 2016 but still the second highest average gross flipping ROI of any year as far back as any data is available (2000).
"I think it is starting to feel a little like 2007 again, only with one major difference: the people buying investment properties are not 'sub-primers,' but investors with more sophisticated deal sourcing methods," said Brad McDaniel, co-founder and CEO with Likely.AI, a company that applies artificial intelligence (AI) and machine learning to predict which homes are likely to be good deals for investors.
"One of our clients, in the wholesale business, made a strategic move to become more data-driven in all aspects of their business," McDaniel says. "I believe this trend, the adoption of big data, and AI by residential real estate investors, is in its infancy. It's been said that real estate is a laggard when it comes to technology adoption; that is changing because of AI."
© 2019 Florida Realtors®
Whether you are planning to sell, refinance, take some equity, make home improvements, move..etc.. knowing the value of your home under the current market can empower you to make better financial decisions, it very easy: find out here