Even though investors bought more homes to fix and flip in the second quarter of 2021, profit margins dipped to a 10-year low, according to the quarterly U.S. Home Flipping Report from ATTOM.
During the quarter, 79,733 single-family homes and condominiums in the United States were flipped, representing 4.9% of all home sales in the quarter.
That’s the first increase for the sector in more than a year.
The gross profit on the typical home flip nationwide (the difference between the median sales price and the median paid by investors) rose in the second quarter of 2021 to $67,000.
That figure was up 2.4% from $65,400 in the first quarter of 2021, and 3.1% from $65,000 in the second quarter of last year. Flippers earned a 33.5% return on investment compared to the original acquisition price.
“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% 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 national gross-flipping ROI was down from 37.2 percent in the first quarter of 2021, and from 40.6 percent 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.
More than 40% of homes flipped in the second quarter of 2021 were purchased with mortgage financing, up slightly from the prior quarter.