US Home Flipping Soars Despite Profitability Plunging To 2011 Lows

While home-flipping activity soared to an eight-year high in 2019, profits cratered to an eight-year, according to a new report from Attom Data Solutions. 

There were $32.5 billion in financed flips in 2019, up 21% from 2018 to a 13-year high. The $32.5 billion was the value of more than 245,864 single-family homes and condos that were flipped. 

The number of homes flipped last year accounted for 6.2% of all homes sold across the country, an 8-year high. This is up from 5.8% of all homes sold in 2018. 

With more and more Americans piling into the home-flipping game as mortgage rates decline, profit margins continued to deteriorate. The average flipper generated roughly $62,900 in gross profit last year, down 3.2% from $65,000 in 2018 and 6% from the peak of $66,899 in 2017.

“Home-flipping profits across the US dropped again in 2019 as the business of buying and selling houses absorbed its worst year since the housing market was mired in the fallout from the Great Recession. This happened as the cost of buying properties continued to rise faster than gains on resale,” said Todd Teta, chief product officer at ATTOM Data Solutions.

“That’s not to say that the home-flipping industry is tanking or losing its allure for investors because home flipping rates are higher than they’ve been in eight years. But profits did continue to decline again for investors,” Teta said. 

The average gross flipping profit of $62,900 translated into a 40.6% ROI for flippers. This was down from 45.8% ROI in 2018 and down from 51.4% ROI in 2017. The latest returns have declined to levels not seen since 2011. 

We noted in Sept 2019 that “the end is near” for home-flippers. Nobel laureate Robert Shiller sat down with Bloomberg late last summer and said, “I wouldn’t be surprised if home prices started falling, and it could be accompanied by a recession.”

Nobel laureate Robert Shiller said he “wouldn’t be at all surprised” if U.S. house prices start to fall https://t.co/tqjfeGfo1l pic.twitter.com/mknbODH4Iq

— Bloomberg Economics (@economics) September 5, 2019

As there is simply no logic in why more people would get into the home-flipping game as profitability sags, maybe the jump in financed flips because of lax lending standards has ushered in a wave of dumb money trying to make a quick buck in a market that is waning.