House flippers saw opportunity in the Tri-Cities housing market’s tight inventory last year and stepped up their efforts. They saw slightly faster turnarounds and while the average return on investment was down most made out well.
Flips in Washington counties TN and VA saw the highest flipping price while those in Greene and Unicoi counties had the best average gross return on investment.
Attom Data Solutions Year-end Home Flipping report shows single-family homes and condos filled and sold in an arms-length transfer for the second time in a 12-month period were up 3.1% from 2015. It was also the highest level since 2006.
A drill down on the report shows 439 flips in the nine local housing markets included in the study, compared to 407 in 2014. Flips as a percentage of total sales ranged from a low of 2.5% in Washington Co. VA to a high of 7.8% in Carter Co.
“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 19% 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 percent in 2016.”
The Tri-Cities fits the bill for regions with older properties. Since the Tri-Cities is broken into two MSA the number of flips didn’t rise to the cutoff for a financing count; however, according to comments made during a recent Tri-Cities Mortgage Bankers Assn. meeting USDA was the top local loan originator last year.
Currently, the Tri-Cities region is still seeing high demand for previously owned, single-family homes and new home construction remains in a slow growth mode. New residential permits in 2016 were down almost half from their pre-recession high. And many of the new homes being build are targeted to the market price ranges that are most profitable, which are not necessarily what many buyers want.
Here’s a county-by-county drill down on 2016 flips.
Flips – 51
Median purchase price – $50,000
Gross profit – $24,113
Avg. days to flip – 163
Flips – 64
Median Purchase Price – $89,950
Gross Profit – $44,800
Avg. days to flip – 170
Flips – 49
Median purchase price – $46,990
Gross profit – $22,010
Avg. days to flip – 183
Flips – 15
Median purchase price – $45,648
Gross profit – $14,352
Avg. days to flip – 168
Flips – 115
Median purchase price – $66,000
Gross profit – $28,000
Avg. days to flip – 189
Flips – 13
Median purchase price – $46,620
Gross profit – $43,480
Avg. days to flip – 178
Flips – 104
Median purchase price – $74,750
Gross profit – $41,350
Avg. days to flip -178
Median purchase price – $48,100
Gross profit – $29,900
Avg. days to flip – 184
Median purchase price – $48,100
Gross profit – $41,000