Tri-Cities house flipping market outperforms U.S. norms

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 Competition in the local home flipping market continues increasing in the third quarter. Local flippers, and some newcomers, are scouring the market for homes. Out-of-area investors with deeper pockets are also stepping up their game as the number of area flip sales increased.

Flips are defined as arms-length transactions that occurred in purchasing and selling the same properties within the past 12 months.

“Home flipping produced another round of competing trends in the third quarter of this year as more investors got in on the action but got less out of it,” says Todd Teta, chief product officer at ATTOM Data Solutions. “It’s clear that declining fortunes weren’t enough to repel investors amid a typical scenario of 32 percent profits before expenses on deals that usually take an average of five months to complete. We will see over the coming months whether the amount they can make on these quick turnarounds will still be enough to keep luring them into the home-flipping business or start pushing them elsewhere.”

As in many localized real estate trends, there are big differences in the U.S. and Tri-Cities’ performance.

There were 216 local flip sales during Q3, according to ATTOM Data Solution’s Home Flipping Report.  During the same period last year, there were 187 sales. This year, they accounted for 7.6% of sales in the Johnson City area – up 5% from last year- and 7.8% in Kingsport-Bristol – up 9% from last year. Flips accounted for 5.7% of U.S. home sales, up from 5.2% last year. Some local flips are not included in the county level drill down because ATTOM’s benchmark for inclusion was 10 third Q3 sales. Washington Co. TN and Bristol, VA – two active flip markets – didn’t make the cut.

Nationwide, flippers are not seeing higher profits, according to ATTOM. That’s not the case in most of the local counties. Gross return on investment (ROI) increased in both local metro areas and in Carter, Hawkins, and Unicoi counties.

Nationwide the average ROI was 32.3%. The Johnson City metro area posted a gross ROI of 90.6% while Kingsport-Bristol had 80.7%. A drill down to counties with enough flips to be included in the analysis include:

  • Hawkins – 169.4%
  • Unicoi – 135.3%
  • Carter – 116.3%
  • Greene – 82.6%
  • Sullivan – 61.2%

House flipping is a big deal in the local real estate economy because the practice involves real estate professionals, local, and increasingly institutional investors Flips are also an important part of the region’s new inventory process. And many – in not most – of the flips are sold in the region’s affordability range. The average flip sale price in the three-county Johnson City metro area was $220,000. In the four-county Kingsport-Bristol metro area was $162,645. Here’s how the average selling price looked in the local counties included in the analysis:

  • Sullivan – $149,900
  • Carter – $164,950
  • Hawkins – $167,700
  • Greene – $168,638
  • Washington – $195,950

November’s regional median sales price for the first 11 months of this year is $195,000 for the first 11 months of this year, according to the Northeast Tennessee Association of Realtors (NETAR) Home Sales Report.

The median year Q3 flips were built in the Johnson City area was 1995. It was 1,410 sq. ft. and 52.2% of the flippers paid cash. The median purchase price was $115,438.

The median year flips were built in the Kingsport-Bristol metro area was 1989. The median square footage was 1,271. It was priced at $90,000 and 62.8% of the sales to flippers were cash deals.

There were 604 flip sales last year, accounting for about 7% of all sales.

NETAR reported 8,944 singled-family and condo sales of properties on the local Multiple Listing Service (MLS) last year. That accounts for a little more than 75% of existing-home sales.

Although the number of new home sales hasn’t been reported by the state, there were 1,171 new residential permits issued in 2020.

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Categories: REAL ESTATE