There are more roadblocks to house flipping this year than last. Renovation materials cost more, supply of doable, low cost houses is less and home prices are, across the board, higher.
As a result, flippers flipped -2% less annually in Q2 2019 than in Q2 2018. according to the National Association of REALTORS ® (NAR). In Q2 2019, 5.9% of all existing home sales were flipped houses (houses bought and sold within 12 months). In Q1 2019, flipped homes represented 7.2% of all existing home sales.
“Home flippers are looking for that deep discounted price, foreclosure properties, but now distressed property sales are miniscule in the market place, so it’s much tougher for people who are just purchasing and looking to flip in the next few months,” said NAR’s chief economist, Lawrence Yun.
The average gross profit for a flipped house in Q2 2019 came in at $62,7000, up +2% from Q1 2019 . In terms of gross ROI after renovation and carrying costs, Q2 2019 saw a 39.9% ROI, down from a gross ROI of 40.9% in Q1 2019 and 44.4% ROI in Q2 2018. Such ROIs have been falling for six consecutive quarters and are now at the lowest levels since Q4 2011.
Home flipping lending volume rose, however, some +31% annually to a 13-year high in Q2 2019, according to Attom Data Solutions. The total dollar volume of financed home flip purchases came in at $8.4B. 41% of flipping investors used mortgages to buy their properties, down from nearly 46% one year ago despite mortgage rates being low.
According to Todd Teta, chief product officer, “Home flipping keeps getting less and less profitable, which is another marker that the post-recession housing boom is softening or may be coming to an end. Flipping houses is still a good business to be in and profits are still healthy in most parts of the country. But, push-and-pull forces in the housing market appear to be working less and less in investors’ favor.
Places where house flipping generated gross ROI profits of 100%+ in Q2 2019 included…
- Scranton PA – +134%
- Pittsburgh PA – +132.5%
- Reading PA – +129.3%
- Kingsport TN – +104.1%
- Augusta GA – +101.1%
Thanks to ATTOM Data Solutions for source data.
Also read: https://timandjulieharris.com/2019/08/27/july-2019-existing-home-sales-increase-as-mortgage-rates-decrease.html, https://timandjulieharris.com/2019/09/27/the-hottest-housing-markets-in-august-were.html, https://timandjulieharris.com/2019/09/19/76-of-buyers-found-their-home-on-their-phone.html