Midstate home flipping down, but still profitable
Home flipping is losing some steam this year as investors have a harder time finding distressed properties to buy in a surging housing market.
California-based ATTOM Data Solutions said U.S. home flipping accounted for 5.1 percent of all home sales in the third quarter, down from 5.6 percent in the second quarter, but still in line with the same quarter a year ago.
In Central Pennsylvania, the share of home flips — properties sold in an arms-length transfer for the second time in 12 months — declined as little as 3 percent in Cumberland County and as much as 27 percent in Lancaster County over the last year.
The dwindling inventory of homes available to purchase at a discount is fueling more competitive offers on properties, which can cut into profits for home flippers, according to ATTOM.
The average gross flipping profit nationally in the third quarter was $66,448 per flip, representing an average 47.7 percent return on investment. That was down from 48.7 percent in the second quarter and down from 51.2 percent a year ago, the lowest average gross flipping return in more than two years, ATTOM said.
In Central Pennsylvania, flipping returns have been a mixed bag. Investment returns, though still above 50 percent, were down in three of the five counties compared with the same quarter a year ago.
The lowest returns were found in Lancaster County at 55.9 percent, down from 71.2 percent a year ago. The average gross profit on a flip in Lancaster County was $56,500 in the third quarter.
In Lebanon County, the average profit was $55,500, but the return was 76.6 percent because investors are able to buy homes for less. The median purchase price in Lebanon County in the third quarter was $72,500, according to ATTOM.
The average return also dropped in Dauphin County. It was 72.5 percent, down from 88.8 percent a year ago.
By comparison, home flippers in Cumberland and York counties have seen bigger profits this year.
York County had one of the best home flipping rates in the country in the third quarter at 8.7 percent of all sales were flips. The average gross profit was $80,668, or a 96.2 percent gross return, according to ATTOM. That was up from 78.2 percent a year ago.
In Cumberland County, the gross return was 66.7 percent, up from 62.3 percent a year ago.
ATTOM said there were 48,685 single-family homes and condos flipped in the U.S. in the third quarter. Those flips were completed by 38,928 investors, a ratio of 1.25 flips per investor. That was the lowest ratio of flips per investor since the second quarter of 2008.
"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," said Daren Blomquist, senior vice president at ATTOM.