Loans for flipping houses soar, but cash still reigns supreme
House flipping activity is at an 11-year high, prompting lending for these projects to soar 27%, according to Attom Data Solutions.
A total of 207,088 homes were flipped over the course of 2017, which represented 5.9% of all single-family homes and condos sold last year, up from 5.7% in 2016. House flipping loan volume reached $16.1 billion, the highest level since 2007.
Flipped homes originally purchased by an investor with financing made up 34.8% of all houses flipped last year, up from 31.6% in 2016. Though the majority of investors purchased flips with cash last year, the growth in flips financed by investors in 2017 hit a nine-year high.
Though the surge in house flipping of recent years may mimic the flipping frenzy from more than a decade ago, today's home flips are built on a much more solid foundation, according to Daren Blomquist, senior vice president at Attom Data Solutions.
"Flippers are behaving more rationally, as evidenced by average gross flipping returns of 50% over the last three years compared to average gross flipping returns of just 31% between 2004 and 2006 — the last time we saw more than 200,000 home flips in consecutive years," Blomquist said in a press release.
"And while financing for flippers has become more readily available in recent years, 65% of flippers still used cash to buy homes flipped in 2017, nearly the reverse of 2004 to 2006, when 63% of flippers were leveraging financing to buy," he continued.
House flips completed in 2017 yielded an average gross profit of $68,143, which represented an average 49.8% return on investment. This average gross flipping ROI is down from 2016's all-time high of 51.9%, but still the second highest in recorded history.
Cities with the highest home flipping rates in 2017 included Memphis, Tenn., Las Vegas and Tampa, Fla.