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‘Unusual Circumstances’ for the Home-Flipping Business

Real estate investors in the third quarter of 2020 have purchased and flipped 57,155 single-family homes and condominiums nationwide, according to the latest ATTOM Data Solutions Home Flipping Report [1].

ATTOM researchers said that for the second consecutive quarter, the rate of house flipping is down, showing the lowest activity in four years, yet the typical investment returns have increased this quarter to the highest level since early 2018.

Flips in Q3 represented 5.1% of home sales or one in 20 transactions. That's down from 6.7% of all home sales last quarter (one in 15) and from 5.5% (one in 18 sales) in the third quarter of 2019.

Gross profit on the typical home flip nationwide—that's the difference between the median sales price and the median paid by investors—rose in the third quarter of 2020 to $73,766—the highest amount since at least 2000. That amount was up from $69,000 in the second quarter of 2020 and from $61,800 in the third quarter of last year, ATTOM reports.

This increase caused profit margins to grow; the typical gross flipping profit was $73,766 in Q3 or a 44% ROI compared to the initial acquisition price.

The gross flipping ROI is up—42,9% for the quarter and 40.3% from last year—for the second consecutive year following nine straight quarters of declines. from 42.9 percent in the second quarter of 2020 and 40.3 percent a year ago.

The opposing trend that reveals lower flipping activity and higher profits reflects the broader housing market pattern—"Home prices kept soaring throughout most of the country in the third quarter as buyers—often seeking larger or more wide-open spaces—chased a dwindling supply of homes for sale," ATTOM's report reads.

“Home-flipping again generated higher profits on less transactions across the United States in the third quarter of 2020 as investors continued to make more money on a declining number of deals,” said Todd Teta, Chief Product Officer at ATTOM. “This all happened in the context of the pandemic, which has created unusual circumstances for the housing market to thrive, and that has included the home-flipping business. Too much is uncertain these days to say whether the latest trends will continue. But for now, the prospects continue looking up for home flipping after a period when they were trending the opposite way.”

ATTOM's full report, which breaks down home flipping rates by region, is available on ATTOMdata.com [1].