IRVINE, Calif.–With continued price appreciation, home flipping continues to be popular, but profits are not as strong as they have been.
The higher home prices combined with increased renovation costs and fewer and fewer distressed properties have all contributed to thinner margins when it comes to buying and selling homes at a profit.
New data from Attom Data Solutions show single-family homes and condos flipped in the third quarter of 2017 brought an average gross profit of $66,448 per flip, a 47.7% return on investment. Attom defines a flip as a home bought and sold in a 12-month period.
That return is down from 48.7% in Q2 and from 51.2% in Q3 2016. It is the lowest average gross flipping return on investment since the middle of 2015.
"Home flipping profits continue to be squeezed by a dwindling inventory of distressed properties available to purchase at a discount and increasing competition from fair-weather home flippers often willing to operate on thinner margins," Daren Blomquist, senior vice president at Attom Data Solutions, said in a statement.
Despite lower returns, home flipping remains popular. Close to 49,000 homes were flipped nationwide during Q3, unchanged from one year earlier, the company said. Where the market is different, however, is more investors are flipping, and they're each flipping fewer homes. The ratio of flips per investor, just 1.25, is the lowest since 2008, Attom Data Solutions reported.
"A more than nine-year low in the ratio of flips per investor is evidence of this increased competition, which is pushing many investors to new metro areas that often have weaker market fundamentals but also come with a bigger supply of discounted distressed properties to flip," Blomquist said in the statement.
The markets with the highest number of flips were Washington, D.C., followed by Nevada, Tennessee, Louisiana, Alabama and Arizona.
Metropolitan areas that saw the highest flipping returns were Pittsburgh, Baton Rouge, Louisiana, Philadelphia, Baltimore and Cleveland.