Fewer Flips Spells Trouble for Market

December 7, 2018
Canary on a branch
Photo: Unsplash/Ray Hennessy

According to new figures from Attom Data Solutions, flips of single-family homes and condos were down 12 percent annually to the lowest number of flips in a quarter since 2015. 

In addition, flips accounted for 5 percent of all home sales on record in the third quarter of 2018, the lowest since 2016. Attom senior vice president Daren Blomquist tells MarketWatch, “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,” adding, "We’ve now seen three consecutive quarters with year-over-year decreases in home flips.”

The last time the housing market saw home-flipping activity peter out in this manner was in 2014, following the mortgage rate hikes in the second half of 2013. During the last housing crash, there were 11 consecutive quarters featuring declines in home flips between 2006 and 2008.

One major contributing factor driving the latest slowdown is the declining return on investment for home flippers. The average gross flipping profit in third quarter was $63,000, or 42.6 percent ROI, representing the lowest return since 2012. Moreover, a third of home flips sold for between $100,000 and $200,000 — and those properties on average generated only a 39 percent gross return.

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