ATTOM Data Solutions, Irvine, Calif., on Thursday released its 2016 Year-End U.S. Home Flipping Report, which shows that 193,009 single family homes and condos were flipped — sold in an arms-length transfer for the second time within a 12-month period — in 2016, up 3.1% from 2015 to the highest level since 2006, when 276,067 single family homes and condos were flipped.
Home flips in 2016 accounted for 5.7% of all single family home and condos sales during the year, up from 5.5% in 2015 to a three-year high but still well below the peak in 2005, when 338,207 single family homes and condos were flipped representing 8.2% of all sales.
The report also shows that 126,256 entities — including both individuals and institutions — flipped homes in 2016, up less than 1% from 2015 to the highest number since 2007, when 143,266 entities flipped properties.
Meanwhile, the share of flipped homes that were purchased by the flipper with financing increased to an eight-year high of 31.5% in 2016 while the median age of homes flipped increased to 37 years — a new high going back to 2000 — and the median square footage of homes flipped decreased to 1422 — a new record low going back to 2000.
“Home flipping was hot in 2016, fueled by low inventory of homes in sellable or rentable condition along with a flood of capital — both foreign and domestic — searching for the returns and stability available with U.S. real estate,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The combination of more home flips and a greater share of financing for flip purchases resulted in a 18% jump in the estimated dollar volume of financing for home flip purchases, up to $12.2 billion for the flips completed in 2016 — a nine-year high.”
“Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount,” Blomquist continued. “Given that many of these markets are more affordable, we are also seeing a higher share of the flipped homes sold to FHA buyers, with that share reaching a four-year high of 19.6% in 2016.”
Homes flipped in 2016 sold for a median price of $189,900, a gross flipping profit of $62,624 above the median purchase price of $127,276 and representing a gross flipping return on investment (ROI) of 49.2%. Both the gross flipping dollar amount and ROI were the highest going back to 2000.
Among 117 metropolitan statistical areas with at least 250 home flips in 2016, there were 11 with an average gross flipping profit of $100,000 or more in 2016.
“Our strong wage growth is still supporting rising home prices, which when combined with the historically low number of homes for sale in Seattle, gives home flippers substantial returns on their investments,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “I believe flipping serves as a negative for any housing market because it further erodes housing affordability, but if there’s a demand for it in the market, it’s a trend we will continue to see.”
In the Los Angeles metro area, which accounted for six of the 39 zip codes with a home flipping rate of at least 20% in 2016, the best opportunity for flipping is in lower-priced neighborhoods with properties that need significant repairs, according to Brett Chotkevys, co-founder of Helpful Home Solution, which flips properties in Los Angeles and other parts of Southern California.
“We do pretty much a full gut on the houses we buy. Most of those we buy are pretty nasty … they’re falling down, there are druggies living there,” said Chotkevys, noting that a typical rehab for his Los Angeles flips will run $40,000 to $50,000, and it’s not “inconceivable” for him to spend six figures on a Los Angeles fix-and-flip. “We like south central (Los Angeles) a little bit more. The barrier to entry is lower. We can pick up properties in the 200s. … There are normal people not making gobs of money that can afford to buy these houses.”
