Local home flips increase despite higher costs, lower profits


Local home flippers were paying more for homes, and in all but one county their gross profits were down during the second quarter. But a tight inventory and high demand continue to fuel the market for flippers while that segment of the housing market slumps to a four-year low in a U.S. analysis.

The number of flips in Sullivan County doubled over last year, and Carter County had a healthy increase. Hawkins County was unchanged. Washington County was the only market with fewer flips, but the decrease was small. It was also the only local market where the Q2 gross profit was higher.

The median flipped price for all the markets was below $200,000 – a price niche that has been squeezed tightest during the two and a half years of record sales.

The mid-year numbers for Hawkins, Sullivan, and Washington counties were at a four-year high. During that period there were 83 flips in Sullivan County, 74 in Washington County and 32 in Hawkins.

The local Q2 flipping market stood in contrast to the what Attom Data Solutions found nationwide. According to the firm’s quarterly flipping report, the rate of homes flipping in the U.S. plunged to nearly a four-year low. A flip is defined as a home that has been sold more than once in a 12-month period.

“Fewer distressed sales are limiting the ability of home flippers to find deep discounts even while rising interest rates are shrinking the pool of potential buyers for flipped homes,” says Daren Blomquist, ATTOM’s senior vice president. “These two forces are squeezing average home flipping returns, pushing investors to leverage financing or migrate to markets with more distressed discounts available to achieve more favorable returns.”

While local flippers are not getting the discounts they used to get on distressed sales, buyer demand and lack of inventory continue to fuel the flipping market.

It’s also noteworthy that considering their share of total sales, flips account for a higher addition to the housing component than new home sales.

Here’s a capsule view of the Q2 year-over-year market performance in local counties included in the current Attom report.

Sullivan County

Flips – 52, up from 27 last year.

Percent of local sales – 6.5%, up from 4.9%.

Median purchase price – $78,966, up from $63,800.

Percent bought with cash – 75%.

Percent of purchases that were ROI – 19.2%.

Median flipped price – $118,750, down from $125,500 last year.

Avg. gross profit – $39,786, down from $61,700 last year.

Gross return on investment – 50.4%, up from 25.3%.

Avg. days to flip 183, down from 212 last year.

Washington County

Flips – 39, down from 44 last year.

Percent of local sales – 5.9%, down from 6%.

Median purchase price – $86,000, up from $69,202.

Percent bought with cash – 64.1%.

Percent of purchases that were ROI – 17.9%.

Median flipped price – $137,100, down from $145,500.

Average gross profit – $51,500 up from $26,205.

Gross return on investment – 59.4% up from 44.5%.

Avg. days to flip – 210, up from 191.

Carter County

Flips – 23, up from 15 last year.

Percent of local sales 11.6%, up from 8%.

Median purchase price – $65,900 up from $60,000.

Percent bought with cash 87%.

Percent of purchases that were ROI – 17.4%.

Median flipped price – $67,000 down from $80,000.

Avg. gross profit – $1,100, down from $30,000.

Gross return on investment – 1.7%, down from 60%.

Avg. days to lip – 209, up from 127.

Hawkins County

Flips – 19, same as Q2 last year.

Percent of local sales 8.3%, down from 8.5%.

Median purchase price – $54,500, down from $62,000.

Percent bought with cash 89.5%.

Percent of purchases that were ROI – 31.6%.

Median flipped price – $45,708, down from $102,500.

Avg. gross profit – $8,792 loss, down from $40,500.

Gross return on investment – down 16.1% down from $65.3%.

Avg. days to flip – 119, down from 211.

According to Attom’s report, the median purchase price during Q2 was $147,980, and the average flipped price was $213,500.  The median price paid in Tennessee was $105,000, and the flipped price was $160,000.

Report methodology

Attom analyzed sales deed data for this report. A single-family home or condo flip was an arms-length transaction that occurred in the quarter where a previous arms-length transaction on the same property had occurred within the last 12 months. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20% and 33% of the property’s after repair value). Gross flipping return on investment was calculated by dividing the gross flipping profit by the first sale (purchase) price.

 

 

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