There were 270 single-family and condo flip sales in the five local counties included in the current ATTOM Data Solutions Home Flipping Report. Last year there were 175 sales, but that was only for the four counties with enough sales to be in the analysis.
Carter, Greene, Hawkins, Sullivan, and Washington counties had at least 10 flips during the second quarter this year and were included in the report. Carter County didn’t make the cut last year.
Nationwide, ATTOM’s report found that as the flipping rate rose, profit margins dipped to a 10-year low. The gross profit on a typical home flip was $67,000. That translates to a 33.5% return on investment. It was the lowest point since the first quarter of 2011 when the housing market had yet to start recovering from the Great Recession’s price slump.
All but one local county had a more typical gross profit than what was reported for the nation. The current typical local gross profit totals are:
Sullivan – $86,500
Hawkins – $80,648
Washington – $78,300
Greene – $77,000
Carter – $43,750
Locally 2015 was the transition year for home prices. That’s when the local market began its runup to the current best-ever market for sales and price appreciation. The only county market with a lower gross return on investment from the second quarter of 2015 was Carter. It was down 93.3% from the benchmark year. Second-quarter gross ROI for the second quarter ranged from a 59.9% increase in Hawkins Co. to a 16.6% increase in Washington Co.
“Home flipping rebounded during the second quarter. But profits sure didn’t, as the typical home flip around the country netted the smallest return on investment in a decade,” said Todd Teta, chief product officer at ATTOM. “However, it’s not like home flipping has become a losing proposition. A 33% profit on a short-term investment remained pretty decent, even after renovation and holding expenses. But with a few more periods like the second quarter of this year, investors may need to reframe how they look at these deals.”
The local picture is a little better than it is nationwide. All of the counties had a better average ROI than the U.S. norm. Still, all but two counties declined from last year. Here’s how the second-quarter gross ROI for the five local counties included in the analysis looked in comparison to the previous year:
Sullivan – 118.5%, up from 101.8%
Hawkins – 78%, up from 37%
Greene – 81.1%, down from 130.4%
Washington – 56.8%, down from 75.6%
Carter – 47.4%, down from 99.1%
The lack of inventory – especially in the affordable housing price range – is one of the primary drivers driving the local flipping market. According to ATTOM’s Home Affordability Report, the average worker in Sullivan and Washington counties has the buying power to buy a median-priced home despite price increases that have been almost double the percentage increase in local wages. Although the other counties were not part of the affordability analysis, the situation is similar. Another challenge is the number of homes for sale in the affordable range. Last month they accounted for about 16% of the active inventory. That dynamic has driven an increase in sales outside the two major markets.
According to the Northeast Tennessee Realtors Association’s (NETAR) latest home sales market share report, Rogersville in Hawkins Co. and Elizabethton in Carter Co. led the region in that metric. And NETAR’s third-quarter year-to-date submarket report found Blountville in Sullivan Co. and Elizabethton Co. led the region’s sales growth rate.
Here’s the current median sales price for flips:
Carter – $136,000
Sullivan – $159,000
Greene – $172,000
Hawkins – $184,000
Washington – $216,250
The regional third quarter year-to-date median sales price was $195,000, up 16%. The average sales price was $237,924, up 20.5%. The average price is skewed higher by a triple-digit increase in existing home sales with $500,000 or more price tags.
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