House flipping declined across the nation during the third quarter of 2020, but not in the Johnson City or Kingsport-Bristol Metropolitan Statistical Areas (MSA). The local increase wasn’t much. In fact, it was flat compared to Q3 last year.
Flipping continues to have a larger role in the local housing market – and probably in the labor economy – than it has on the national level.
There were 187 local flips of single-family homes and townhomes/condominiums during Q3, up from 184 last year and 102 during the second quarter of this year. That accounts for almost 7% of all home sales in the two local MSAs.
There was a performance split in the share of total sales. Johnson City metro flips accounted for 6.7% in Q3 this year, up from 5.7% last year. Kingsport-Bristol’s flip market share was 6.9% this year, down from 8.2% during Q3 last year.
Kingsport-Bristol flippers came close to doubling their investment. The gross return on investment for flippers was up in Kingsport-Bristol and down in the Johnson City MSA.
THE BIG PICTURE
“Home-flipping again generated higher profits on less transactions across the United States in the third quarter of 2020 as investors continued to make more money on a declining number of deals,” said Todd Teta, chief product officer at ATTOM Data Solutions. “This all happened in the context of the pandemic, which has created unusual circumstances for the housing market to thrive, and that has included the home-flipping business. Too much is uncertain these days to say whether the latest trends will continue. But for now, the prospects continue looking up for home flipping after a period when they were trending the opposite way.”
Nationwide flips dropped to 5.1% of all home sales during Q3. According to ATTOM Data Solution’s Home Flipping Report, that’s down from 6.7% of all homes sales during Q2 this year and 5.5% from last year.
While the home-flipping rate dropped across the nation, both profits and profit margins increased. The gross profit on a typical home flip was $73,766, up from $69,000 in the second quarter and up from $61,800 during Q3 last year.
THE LOCAL PICTURE
Johnson City MSA
There were 80 flips in the three-county MSA. Flippers paid a median sales price of $90,000 for those homes, and 70% were cash deals.
The median flip sales price was $142,450. It gave flippers and average $52,450 gross profit and a 58.3% return on investment (ROI). A year ago, the gross profit was $61,601, and the ROI was 93.3%.
Thirty-five percent of the Q3 sales went to cash buyers. Last year the share of cash sales was 8.8%.
The average number of days it took to flip a Q3 sale was 173, down from 196 last year.
The Johnson City MSA includes Carter, Washington, and Unicoi counties.
There were 107 flips in the four-county Kingsport-Bristol MSA. The median price they paid was $75,000, and 70.1% of those were cash deals.
The median flip sales price was $140,000. That gave flippers a gross profit of $65,000 and a median ROI of 86.7%. Last year it was $43,500 for a 63% ROI.
Almost a third (30.8%) of this year’s Q3 sales went to cash buyers compared to 10.3% last year.
The average number of days to flip was 213 compared to 186 during Q3 last year.
The Kingsport-Bristol MSA included Hawkins and Sullivan counties in NE Tenn. and Scott and Washington counties in SW Va.
ATTOM analyzed sales deed data for its report. A single-family home or condo flip was any 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.
Categories: REAL ESTATE