House flipping is back in a very big way. Whether the impetus to flip houses comes from constant HGTV real estate reality shows, increasing rents, historically low inventories, whatever, flipped single-family and condominium sales represented 5.9% of all residential sales in 2017, according to ATTOM Data Solutions, the curator of the nation’s premier property database.
In ATTOM’s Q4 2017 US Home Flipping Report, there were 207,088 flipped single-family and condo units, an 11-year high. There was a total of 138,410 entities (individuals and/or institutions) that flipped those houses in 2017, the highest number of entities since 2007.
Some people are nervous about this housing flipping phenomenon…remember the housing crisis? Not Daren Blomquist, senior vice president of ATTOM Data Solutions. Blomquist said, “The surge in house flipping in the last three years is built on a more fundamentally sound foundation than the flipping frenzy that we witnessed little more than a decade ago. Flippers are behaving more rationally as evidenced by the average gross flipping returns of 50% over the last three years as compared to the average gross flipping returns of just 31% between 2004-06, the last time we saw +200,000 home flips in consecutive years.”
In 2017,the top flipping rates occurred in Memphis, Tampa, Birmingham and the perennial favorite, Phoenix. There was $16.1B in financed flips, an increase of 27% from 2016. But still, 65% of flippers used cash to buy and fix their flips. During 2004-06, the reverse was true as 65% of flippers then used leveraging financing to buy and fix their flips.
Lender financed flips represented 34.8% of houses flipped in 2017, up from 31.6% in 2016. This is the highest level of financed flips since 2008.
Matt Humphrey, co-founder and CEO of LendHome, said, “We aren’t surprised that the dollar volume and share of financed flips are hitting new highs. LendHome saw +70% increase from 2016 to 2017 in its dollar volume of loans on completed home flips.
“Fix and flip has become an asset class on its own that is well-financed by banks and is highly sought by investor buyers,” said Maksim Stavinskuy, co-founder and CEO of ROC, a nationwide originator that saw nearly double the dollar volume of loans in house flips from 2016 to 2017.
Completed home flips in 2017 with an average 182 days needed to flip yielded an average gross profit of $68,148, according to ATTOM. This average gross profit increased +5% from 2016 and is a new all-time.
Places with populations of +1M people that experienced the biggest increases in house flipping in 2017 included:
Buffalo, NY
New York-North New Jersey
Dallas-Ft. Worth, TX
Louisville, KY
Birmingham, AL
Rochester, NY
Indianapolis, IN
Cleveland, OH
Houston, TX
Brad McDonald, co-founder and CEO of Likely.AI, a company that applies AI and machine learning to predict the future of real estate events and mortgage origination, thinks that the main difference between today’s flippers and 2007 flippers is that today’s flippers are not “subprime” investors. “These investors are more sophisticated and they’re using more sophisticated deal sourcing methods.”
