Flipping houses flops in 3Q as returns fall to 6-year low

Register now

House flipping fell for the third consecutive quarter, following a pattern seen the last time mortgage rates spiked, according to Attom Data Solutions. At the same time, average return on investment sank to a six-year low.

A total of 45,901 single-family homes and condos were flipped in 3Q18, marking a 12% drop from a year ago to a 3.5-year low from the first quarter of 2015. Houses flipped sold for an average of $63,000 more than what the home flipper purchased them for, down from the all-time high of $68,000 achieved in the first quarter and from $65,000 a year ago.

The gross flipping profit in 3Q18 represented an average 42.6% gross flipping ROI, the lowest level seen since the first quarter of 2012. While continued home price appreciation may suggest flippers can sell houses for higher prices, it also means they likely purchased the properties at a relatively higher cost.

The percentage of flipped homes purchased with financing held fairly steady at 38.8% in the third quarter, down from 39.2% a year ago and 40.7% the previous quarter.

"Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending," Daren Blomquist, senior vice president at Attom, said in a press release.

"We've now seen three consecutive quarters with year-over-year decreases in home flips. The last time that happened was in 2014 following the mortgage rate jump in the second half of 2013, but it's still far from the 11 consecutive quarters with year-over-year decreases in home flips extending from 2Q 2006 through 4Q 2008 and leading up to the last housing crash," he said.

The houses flipped in the third quarter represented 5% of all single-family homes and condos sold in the quarter — the lowest flipping rate seen in two years. The flipping rate fell from 5.1% a year ago and 5.2% from the previous quarter.

For reprint and licensing requests for this article, click here.
Real estate Housing market Purchase Mortgage rates Attom Data Solutions