Flips Falter: Fixer-Upper Home Sales Share Declines as Margins Decline

Returned properties fell to 2.7% of all sales in the first quarter of 2021, the lowest share in decades, according to a new report.

The booming real estate market has generally made it easier for sellers – unless these sellers have been investors coming out of a renovation.

According to a report from Attom Data Solutions, single-family homes and condos sold by pinball machines accounted for just 2.7% of all sales in the first quarter of 2021, the lowest share seen in more than two decades. Prices and profit margins on returned homes were also down.

Todd Teta | Attom data solutions

“It is too early to say for sure whether home fins have actually entered an extended wait pattern,” said Todd Teta, Director of Product at Attom. a press release from Thursday. “But the first quarter of 2021 certainly marked a noticeable slowdown for the turnaround industry, with the sharp decline in activity suggesting that investors might fear that prices have simply risen too high.”

The real estate data company said the share of home sales from flips was 4.8% in the fourth quarter of 2021, and 7.5 percent the previous quarter.

Among metropolitan areas with a population of 200,000 or more, the markets with the largest quarterly declines in house turnover rates were:

  • Memphis, Tennessee (down 80%)
  • Lakeland, Florida (down 75%)
  • San Francisco (down 74%)
  • Columbia, South Carolina (down 73%)
  • Palm Bay, Florida (down 73%)

In markets where the home turnaround was on the rise, the largest increases were recorded in:

  • Springfield, Massachusetts (up 114%)
  • Albuquerque, New Mexico (up 103%)
  • Springfield, Illinois (up 95%)
  • South Bend, Indiana (up 86%)
  • Boston (up 79%)

Gross profit on a typical flip was $ 63,500 in the first quarter of this year – up slightly year over year, but down from $ 71,000 in the fourth quarter from 2020.

The returned homes that sold went quickly. Domestic fins took an average of 159 days to close the sale, the fastest rate since 2013.

The Attom report raised the possibility that high house prices in recent months may make some investors reluctant to take on new projects.

This price hike also raised the possibility that home values ​​during the housing boom, now in its 10th year, might have increased to the point where they could flatten out over the roughly six month period most investors need to renovate and remodel homes, ”the Attom report says.

The drop in profits was caused by a quarterly drop in median selling prices for returned properties. The median return home sold for $ 231,500 nationwide in the first quarter, up from $ 241,000 in the previous three months. Still, median prices rose 4% year-on-year.

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