In a reversal of fortune, home flippers enjoyed their best-ever paydays this fall as the pandemic pushed home prices up to new highs.
Flippers pocketed an all-time high profit of $73,766, or a 44.4% return on their initial investments, in the third quarter of this year, according to a recent report from ATTOM Data Solutions, a real estate information company. After years of declining profits, typical gains rose for the second quarter in a row. These sledgehammer-swinging investors made roughly 19.3% more than they did a year ago.
(To come up with its findings, ATTOM analyzed sales deeds for properties that were sold twice within a 12-month period. The profits were the difference between the homes’ median purchase price and their subsequent median sales price in the third quarter of the year. The profits did not include how much money and labor flippers put into the residence.)
“Spurred by low interest rates and a desire for more space, a surge of buyers relatively unscathed by the economic damage resulting from the crisis has expanded the market, raising demand for a dwindling supply of homes,” says ATTOM’s chief product officer, Todd Teta.
“The spike in the number of regular home buyers combined with the additional factor of [folks leaving the cities for the suburbs] has resulted in more buyers scooping up properties, leaving less for investors.”
Investors purchased flips for a median $166,234, renovated the properties, and sold them in the third quarter of the year for a median $240,000. That’s still below the national median home price of $348,000 in November, according to the latest realtor.com® data.
However, even as profits soared, the number of flips fell as the number of homes available for sale plummeted. About 5.1% of all home sales, representing more than 57,000 single-family homes and condominiums, were flipped in the third quarter of the year. In the second quarter, flips made up 6.7% of home sales.
Where did home-flipping profits rise—and fall—the most?
Real estate investors made the most money in Texas on home flips. Annual profits soared in Brownsville, TX, a struggling, more affordable metropolitan area on the U.S.-Mexico border, by 182.9% in the third quarter of the year.
The metro was followed by the Lone Star State’s capital city of Austin, a burgeoning tech hub, where profits rose 176.4%. Next up was Waco, TX, home of HGTV’s home-flipping hit “Fixer Upper,” by 157.4%; Springfield, MO, at 145.3%; and Savannah, GA, at 143.6%.
On the flip side were the metros where returns on investments fell the most. Corpus Christi, TX, experienced the biggest losses, at 77%. Hilton Head, SC, saw profits decline by 72.9%. They dropped in Boulder, CO, by 69.1%; in Wilmington, NC, by 58.9%; and South Bend, IN, by 54.1%.
Only metros with at least 50 flips were included. Metros include the main city and the surrounding suburbs and smaller towns and urban areas.
Where is home flipping up—and down—the most?
Ironically, home flipping was both up and down the most in some of the smaller, secondary cities and surrounding areas that have been attracting new residents due to their affordability. These were the kinds of places where folks could often find a home for considerably less than in the bigger cities.
The biggest increase in home flipping was in the Davenport, IA, metropolitan area, where it rose 18.5% in the third quarter of the year. The metro was followed by Hilton Head, SC, at 16.8%; Scranton, PA, at 12.2%; Amarillo, TX, at 10.9%; and Kalamazoo, MI, at 7.7%.
The biggest drop was in Killeen, TX, where home flips fell 44.5%. Rounding out the top five in biggest drops were Savannah, GA, at minus 43%; York, PA, at minus 42%; Greeley, CO, at minus 41.5%; and Springfield, MA, at minus 39.8%.
Only metros with populations of at least 200,000 residents and 50 home flips in the third quarter were included.