House flipping hits lowest level since 2000

Only 2.7% of all home sales in the first quarter of 2021 were flips — or one in 37 transactions, the lowest level since 2000.

Per a report from ATTOM, a national property database, 32,526 single-family homes and condominiums in the U.S. were flipped in the first quarter. That number is down from 4.8%, or one in every 21 home sales in the nation during the fourth quarter of 2020. It’s also down from 7.5%, or one in 13 sales, in the first quarter of 2020.

“It’s too early to say for sure whether home flippers indeed have gone into an extended holding pattern,” said Todd Teta, ATTOM chief product officer. “But the first quarter of 2021 certainly marked a notable downturn for the flipping industry, with the big drop in activity suggesting that investors may be worried that prices have simply gone up too high. After riding the housing boom along with others for years, they now might be having second thoughts.”

The gross profit on the typical home flip nationwide — the difference between the median sales price and the median price paid by investors — declined to $63,500 in the first quarter of 2021, from $71,000 in the fourth quarter of 2020. The gross flipping return on investment was down from 41.8% in the fourth quarter of 2020 to its lowest point since the second quarter of 2011.

Regionally, house flipping was down in 70 percent of U.S. markets. Among those metros — defined as having at least 200,000 residents and 50 house flips — the largest quarterly decreases in the home flipping rate came in Memphis, Tennessee (down 80%), Lakeland, Florida (down 75%), San Francisco, (down 74%), Columbia, South Carolina (down 73%), and Palm Bay, Florida (down 73%). Dallas (down 72%), Orlando, Florida (down 71%), and Tampa, Florida (down 69%) also saw large decreases.

The biggest increases in home-flipping rates were in Springfield, Massachusetts (up 114%), Albuquerque (up 103%), Springfield, Illinois (up 95%), South Bend, Indiana (up 86%), and Boston (up 79%).

Profit margins dipped from the first quarter of 2020 to the first quarter of 2021 in 66 of the 108 metro areas. Markets with the biggest declines were Savannah, Georgia (return on investment down 80%), Tuscaloosa, Alabama (down 76%), Salisbury, Maryland (down 73%), Evansville, Indiana (down 71%), and Davenport, Iowa (down 68%).

The highest raw profits in the first quarter of 2021 were concentrated in the West, Northeast and South. The top 20 in those regions were led by New York (gross profit of $166,375), Pittsburgh, Pennsylvania ($152,041), Los Angeles ($145,000), San Francisco ($139,250), and San Diego ($136,000), California.

Nineteen of the smallest 20 raw profits were spread across southern and midwestern metro areas, with the lowest in Gulfport, Mississippi ($11,594 profit), Evansville, Indiana ($14,100), South Bend, Indiana ($18,000), Houston ($24,486), and Austin ($27,950).

Of the 32,526 U.S. homes flipped in the first quarter of 2021, 10 percent were sold to buyers using loans backed by the Federal Housing Administration (FHA), down from 11.6% in the prior quarter and from 14.7% in the first quarter of 2020.

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