Real estate investors in the second quarter of 2021 have purchased and flipped 79,733 single-family homes and condominiums nationwide, according to the latest ATTOM Home Flipping Report [1]. That accounts for almost 5% of all home sales this quarter, which indicates an intensifying, yet relatively slow, home-flipping market and is the first quarterly increase in more than a year.
The buy-flip-sell rate rose from 3.5% in Q1. Still, it is not where it was a year ago, when it was at 6.8% of sales, the rate remains below typical numbers seen in the past decade. Also, the report showed profit margins on flips dipped to a 10-year low.
While gross profit on the typical home flip nationwide (the difference between the median sales price and the median paid by investors) rose in Q2 to $67,000—a 2.4% increase from $65,400 in Q1 2021 and 3.1% from $65,000 in the Q2 last year—the more important measure of profit margins slid downward, with the typical gross-flipping profit of $67,000 in the second quarter translating into just a 33.5% return on investment compared to the original acquisition price.
The national gross-flipping ROI was down from 37.2% in Q1, and from 40.6% a year earlier, to its lowest point since the first quarter of 2011, when the housing market had yet to start recovering from a price slump brought on by the Great Recession in the late 2000s.
The hot housing market led to price increases on both ends of the flip.
Home price run-ups that hit an all-time high of $267,000, up 10.6% for the quarter, still failed to surpass increases that investors were absorbing—13.6% quarterly and 25% annually—when they bought the homes that they sold in the second quarter of this year. That gap—prices rising more on purchase than resale—led to profit margins dropping to a 10-year low.
“Home flipping rebounded during the second quarter. But profits sure didn’t, as the typical home flip around the country netted the smallest return on investment in a decade,” said Todd Teta, chief product officer at ATTOM. “However, it’s not like home flipping has become a losing proposition. A 33 percent profit on a short-term investment remained pretty decent, even after renovation and holding expenses. But with a few more periods like the second quarter of this year, investors may need to reframe how they look at these deals."
The full report including local metrics is available at ATTOM.com [1].