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Home flipping is getting less profitable; should you sell before it’s too late?

Aly J. Yale
The Mortgage Reports contributor

Flipping profits falter

Though home flipping is actually making up a larger share of all home sales lately, investors are making less profit from their ventures. In fact, according to new data, home flipping profits have hit their lowest point since early 2016.

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Home flipping is up…

According to the Q1 2019 Home Flipping Report from ATTOM Data Solutions, flipped homes accounted for 7.2 percent of all home sales last quarter — a jump from the 6.7 percent it was a year ago.

Overall, home flipping is up in 62 percent of all markets, with Columbus, Georgia leading the charge. There, flipping jumped 83 percent over the last year.

Other cities to see significant upticks in home flipping were Raleigh and Charlotte, North Carolina (up 73 percent and 65 percent, respectively); McAllen, Texas (up 55 percent); and Milwaukee (up 49 percent).

Home prices: How to get the best deal on a flip

But profits are down

Despite this increased share of flipping efforts, investors are making less money off their sales. Data shows home flipping profits averaged just $60,000 per transaction last quarter, a decrease from $68,000 a year ago and the lowest average profit since Q1 2016.

According to Todd Teta, chief product officer at ATTOM Data Solutions, changing market conditions are the likely culprit.

“With interest rates dropping and home price increases starting to ease, investors may be getting out while the getting is good before the market softens further,” Teta said. “While the home flipping rate is increasing, gross profits and ROI are starting to weaken, and the number of investors that are flipping is down 11 percent from last year. Therefore, if investors are seeing profit margins drop, they may be acting now and selling before price increases drop even more.”

House flipping hits new low: why that’s good for today’s buyers

Profits aren’t down everywhere, though. In 11 metros, home flipping profits have actually more than doubled in the last year. The highest flipping returns last quarter were seen in Pittsburgh (up 131.2 percent); Flint, Michigan (127.6 percent); and Shreveport, Louisiana (up 112.5 percent).

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