House flippers are no longer making a killing, but activity is as high as ever

Returns dropped to an eight-year lows, but activity rose to an eight-year high

Home-flipping is at an 8 year high (Credit: iStock)
Home-flipping is at an 8 year high (Credit: iStock)

House flippers aren’t making what they used to, but it seems everyone still wants in on the market.

House flipping activity increased to an eight-year high in 2019 but returns conversely dropped to eight-year low, according to an ATTOM Data Solutions study reported by Housing Wire. ATTOM’s Todd Teta said that was because of cost of buying.

ATTOM Data Solutions’ Todd Teta

ATTOM Data Solutions’ Todd Teta

“This happened as the cost of buying properties continued to rise faster than gains on resale,” he said.

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Still, flipping appeared to pay off for many investors. Homes flipped last year made a gross profit of around $62,900 — a 40.6 percent return on their investment compared to their original purchase price. In 2018, they made an average gross profit of $65,000, or a 45.8 percent return.

Competition from well-financed corporate flippers might play a role in shrinking profits. The flipping industry has become increasingly institutionalized over the last several years. As of last year, corporate sellers made up more than 40 percent of flippers.

Some have even started paying rideshare drivers referral fees for spotting potential flips in neighborhoods where rents and home prices are rapidly increasing.

Nearly 246,000 single-family homes were flipped last year using $32.5 billion in financing, a 21 percent increase from 2018, but profits for flippers dropped about 3.2 percent year over year.

Activity increased generally across the country — home flipping rates increased in 64 percent of markets year over year. In total, around 6.2 percent of all sales last year were flips. [Housingwire]Dennis Lynch