Local flip sales down, gross profit margins decline


TRI-CITIES, Tenn. – Local investors added 179 house flips to the region’s existing home sales during the second quarter of this year, according to ATTOM’s second quarter Home Flipping Report. Sales are lower than they were during Q2 last year, but the market share continues to be in the 10% of all existing home sales range.

The number of single-family and condo sales flips ranged from a high of 54 in Washington, Co. TN to 10 in Bristol, VA. And while the flippers’ average gross profit margins were up from this time last year, the average percentage return on investment (ROI) was down in all counties except Hawkins.

Flipping is a popular real estate investor pursuit. It’s also an important component for the housing market. Flips traditionally account for about one-in-10 existing home sales, and half are at prices less than the region’s median price. It’s also noteworthy that many of those flip sales are in the affordability range of a market where affordability has taken a beating.

Here’s the Q2 sales by county and their avg. sales price:

  • Carter – 15 -$222,000.
  • Greene – 37 – $205,000.
  • Hawkins – 17 – $202,000.
  • Sullivan – 32 – $189,290.
  • Washington, TN – 54 – $215,000.
  • Bristol VA – 10 – $164,500.
  • Washington, VA – 14 – $274,000.

The highest avg. gross profit for the Q2 sales was $158,000 in Hawkins Co. It was driven by an atypical median purchase price flippers paid – $44,000. The typical price during the quarter ranged from $100,000 in Bristol, VA. to $194,250 in Washington, Co. VA.

ATTOM, a leading curator of land, property, and real estate data, defines a flip as any arms-length transaction in the quarter where a previous arms-length transaction of the same property occurred within the past 12 months. The average gross flipping profit is the difference between the purchase and flipped prices and doesn’t include rehab and other expenses. Flipping vets estimate those expenses typically run between 20% and 33% of the property’s after-repair value.

Nationwide, the Q2 analysis found flipping activity decreased while investor profits and profit margins showed sign of recovering from a slump that had lashed them by more than half in the last two years.

The US flipping profit improvement came amid a rebound in the broader housing market, which saw single-family median home prices spike during the Spring buying season. Locally median prices increases during the Spring season ranged from a monthly low of 5% to 13%.

“Fortunes for investors who flip homes for quick profits are showing more signs of turning around after a long and unusual period when they went down while the rest of the market went up,” said Rob Barber, CEO for ATTOM. “However, the latest investment returns may not be substantial enough to cover the holding costs on typical deals. And it’s still too early to declare the profit downturn over, as much will depend on whether the second-quarter market surge keeps going or whether it retreats again, like it did last year.”

Locally, the flip market continues to outperform the national trend. The market share has consistently been in the 10% range of all existing home sales, even though the total number of flip sales was down 6.7% in the Johnson City metro area and down 4.3% in Kingsport-Bristol. What flippers are paying for properties and their rehab cost have increased proportionally but remain a viable market for those who keep a close eye on costs.

The percentage of purchases flippers pay with cash was 58.1% in the three-county Johnson City metro area and 72.5% in the four-county Kingsport-Bristol metro area.

One-in-four of local flip sales were to cash buyers in the Johnson City metro area and one-in-three Kingsport-Bristol buyers.

FHA sales accounted for 16.2% of Q2 Johnson City metro sales and 11.3% of those in Kingsport-Bristol.







Categories: REAL ESTATE