House Flipping Profits And ROI Plunge Across The Country, Says New Report

ATTOM Data Solutions published a new report called Q1 2019 US Home Flipping Report, which shows house-flipping volume rebounded across the country earlier this year as gross profits and return on investment plunged.

About 49,000 homes flipped in 1Q19, represented 7.2% of all home sales last quarter, up from 5.9% MoM and up 6.7% YoY, the highest home flipping rate since 1Q10. This means investors, with some of the highest confidence levels in years, overlooking the economy cycling down into 2H19, are in a state of mania as they indiscriminately flip anything they can find.

As investors pile into homes, homes flipped last quarter sold at an average gross profit of $60,000, down from $62,000 in 4Q18 and down from $68,000 in 1Q18. This means flipping profit for investors are quickly compressing, with the lowest average gross flipping profits since 1Q16.

Investors had an average of 38.7% return on investment in 1Q19, down from 42.5% average gross flipping return on investment in 4Q18 and down from 48.6% in 1Q18 to the lowest level since 3Q11, currently at eight-year lows.

"With interest rates dropping and home price increases starting to ease, investors may be getting out while the getting is good, before the market softens further," said Todd Teta, chief product officer at ATTOM Data Solutions.

"While the home flipping rate is increasing, gross profits and ROI are starting to weaken and the number of investors that are flipping is down 11% from last year. Therefore, if investors are seeing profit margins drop, they may be acting now and selling before price increases drop even more," Teta added.

Homes flipped in 1Q19 were on the market for an average of 180 days, up from 175 days in 4Q18 but down from 182 days in 1Q18.

ATTOM Data Solutions was able to find eight zip codes out of 1,433 that had 30% of all transactions flipped homes, here are the top five: 93212 in Kings County, California (48%); 11433 in Queens County, New York (35.7%); 33147 Miami-Dade County, Florida (32.7%); 38115 in Shelby County, Tennessee (32.4%); and 92802 in Orange County, California (32.1%).

As Zerohedge readers would know, compressing margins for house flippers is a 'canary in the coal mine' that could suggest the overall house market will continue to deteriorate into 2020.