A total of 45,901 U.S. single family homes and condos were flipped in the third quarter of 2018, down 12% from a year ago to the lowest level since Q1 2015, according to ATTOM Data Solutions Q3 2018 U.S. Home Flipping Report, out Thursday.
Homes flipped in Q3 2018 represented 5.0% of all single family home and condo sales during the quarter — down from a 5.2% home flipping rate in Q2 2018 and down from a 5.1% home flipping rate in Q3 2017 to the lowest level since Q3 2016.
"Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "We've now seen three consecutive quarters with year-over-year decreases in home flips. The last time that happened was in 2014 following the mortgage rate jump in the second half of 2013, but it's still far from the 11 consecutive quarters with year-over-year decreases in home flips extending from Q2 2006 through Q4 2008 and leading up to the last housing crash."
Average home flipping returns drop to 6.5-year low
Homes flipped in Q3 2018 sold for an average of $63,000 more than what the home flipper purchased them for, down from an all-time high average gross flipping profit of $68,000 in the first quarter and down from an average gross flipping profit of $65,000 a year ago to the lowest level since Q2 2016.
The average gross flipping profit of $63,000 in Q3 2018 represented an average 42.6% gross flipping return on investment, down from an average 44.1% gross flipping ROI in the previous quarter and down from an average 48.1% gross flipping ROI in Q3 2017 to the lowest level since Q1 2012 — a 6.5-year low.
Nearly one-third of home flips sold for $100,000 to $200,000
The share of homes flipped that were sold by the home flipper between $100,000 to $200,000 made up 31.6% of all flipped sales, while those flip sales that occurred on homes sold for more than $5 million saw the highest gross flipping return on investment (ROI) of any price range.
|Sales Price Range ||Share of Total Home Flips || |
|Under $50K ||6.3% || |
|$50K - $100K ||9.3% || |
|$100K - $200K ||31.6% || |
|$200K - $300K ||24.8% || |
|$300K - $400K ||12.1% || |
|$400K - $500K ||6.0% || |
|$500K - $750K ||6.2% || |
|$750K - $1M ||1.8% || |
|$1M - $2M ||1.6% || |
|$2M - $5M ||0.3% || |
|Over $5M ||0.1% || |
Highest gross flipping returns in Pennsylvania, Ohio and Kentucky
States with the highest average gross flipping ROI in Q3 2018 were Pennsylvania (96.7%), Ohio (90.4%), Kentucky (84.7%), Louisiana (82.4%), and Michigan (78.6%).
Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest average gross flipping ROI in Q3 2018 were Pittsburgh, Pennsylvania (136.7%); Cleveland, Ohio(120.2%); Atlantic City, New Jersey (110.3%); Scranton, Pennsylvania (109.0%); and Philadelphia, Pennsylvania (107.9%).
Among 1,264 U.S. zip codes analyzed in the report with at least 10 flips during the quarter, those with the highest average gross flipping ROI in Q3 2018 were 33993 in Cape Coral, Florida (881.0%); 41091 in Cincinnati, Ohio (631.0%); 40356 in Lexington, Kentucky (421.1%); and 21216 (410.4%) and 21218 (357.1%), both in Baltimore, Maryland.
Highest home flipping rates in Arizona, Tennessee and Nevada
Arizona had the highest home flipping rate among all states in Q3 2018 (7.7%), followed by Tennessee (7.5%), Nevada (7.2%), Alabama (6.6%), and Maryland (6.0%).
Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest home flipping rate for the quarter were Memphis, Tennessee (10.4%); Atlantic City, New Jersey(9.1%); Phoenix, Arizona (8.6%); Las Vegas, Nevada (7.8%) and Huntsville, Alabama (7.5%).
Among 1,264 U.S. zip codes analyzed in the report with at least 10 flips during the quarter, those with the highest home flipping rate were 38115 in Memphis, Tennessee (28.1%); 33142 in Miami, Florida (27.3%); 11717 in Brentwood, New York (27.1%); 75224 in Dallas, Texas (26.8%); and 11436 in the county of Queens, New York (25.6%).
Share of flipped homes purchased with financing dips slightly
Homes flipped in Q3 2018 that were originally purchased with financing by the home flipper represented 38.8% of all homes flipped during the quarter, down from 40.7% in the previous quarter and down from 39.2% a year ago.
States where the% of flips that were purchased with financing in the third quarter of 2018 that were well above the national average of 38.8% included; the District of Columbia (67.2%), Colorado (55.7%), Minnesota(52.1%), New Hampshire (52.0%) and Rhode Island (49.2%).
Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest% of home flip sales purchased with financing in Q3 2018 were Madison, Wisconsin (62.5%); Colorado Springs, Colorado (62.2%); Cedar Rapids, Iowa (60.4%) Manchester, New Hampshire (57.6%) and Greeley, Colorado (56.9%).
Share of flips sold to FHA buyers at a 10-year low
Of the homes flipped in Q3 2018, 12.7% were sold to buyers using loans backed by the Federal Housing Administration (FHA) — likely first-time homebuyers — down from 16.1% in Q3 2017 to a 10-year low.
Among 53 metro areas analyzed in the report with at least 1 million people, those with the smallest share of completed flips sold to FHA buyers in Q3 2018 were San Jose, California (1.5%); Raleigh, North Carolina (3.8%); Las Vegas, Nevada (5.1%); San Francisco, California (5.7%); and Memphis, Tennessee (5.8%).
Among the 53 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to FHA buyers in Q3 2018 were Riverside, California (24.3%); Baltimore, Maryland (23.0%); Chicago, Illinois (21.1%); Philadelphia, Pennsylvania (20.5%); and San Antonio, Texas (20.2%).
Other high-level report takeaways
- The median year built of homes flipped in Q3 2018 was 1978, the third consecutive quarter for the oldest median year built as far back as data is available — Q1 2000.
- The median square footage of homes flipped in Q3 2018 was 1,408, the smallest median square footage as far back as data is available — Q1 2000.
- A total of 37,905 entities flipped properties in Q3 2018, a ratio of 1.21 flips per entity, the lowest ratio of flips per entity since Q4 2007 — a nearly 11-year low.
- The average time to complete a home flip was 179 days, down from 185 days in the previous quarter, and down from 180 days in Q3 2017.