14 Markets Where Home Flip Profits Have Skyrocketed

Home flipping rates fizzled in the tail end of 2020, representing only 5.1% of all home sales, or 57,155 total single-family homes and condominiums. Yet data show there was certainly money to be made. Profits skyrocketed amid last year’s low inventory, heavy buyer competition, and record-low interest rates, per a recent analysis from ATTOM Data Solutions.

COVID-19’s Impact on Home Flipping

Fix and flips declined from 6.7% in Q2 to 5.1% in Q3, which is typical as the cold-weather season approaches. However, 2020’s rate also fell short of Q3 2019, where flips accounted for 5.5% of sales.

While flippers are not selling as much as usual, they’re certainly making up for it with packed profits.

All year long, we’ve seen one of the most fast-paced real estate markets in recent history. Sales have moved quickly, and buyers are fleeing big cities in search of larger homes and better standards of living now that most can work remotely. These factors have led to low inventory levels in the majority of large markets, forcing higher prices, competitive offers, and quicker days on market.

“Home-flipping again generated higher profits on less transactions across the United States in the third quarter of 2020 as investors continued to make more money on a declining number of deals,” said Todd Teta, chief product officer at ATTOM Data Solutions. “This all happened in the context of the pandemic, which has created unusual circumstances for the housing market to thrive, and that has included the home-flipping business. Too much is uncertain these days to say whether the latest trends will continue. But for now, the prospects continue looking up for home flipping after a period when they were trending the opposite way.”

Even though the home flip rate declined, investors have a lot to be happy about. The median profit from a flip was marked at $73,766 in Q3, a rise from $69,000 in Q2 and a massive gain year-over-year. In Q3 2019, the average gross profit was $61,000, meaning investors are now making an average of $12,000 more this year.

Overall, investors are enjoying huge returns on investment (ROI)—44.4% to be exact, 4% more than last year. The improvement in typical ROI marked the second consecutive year-over-year increase following nine straight quarters of declines.

Home Flips Dip in 9 Out of 10 Markets

Across the United States, 93.1% of markets saw home flipping rates drop. Among the largest declines were Killeen, Texas (44.5%); Savannah, Georgia (43%); York, Pennsylvania (42%); Greeley, Colorado (41.5%); and Springfield, Massachusetts (39.8%).

Among metros with one million or more residents, the largest declines come from Raleigh, North Carolina (39.1%); Atlanta, Georgia (38.5); Kansas City, Missouri (38.3%); San Diego, California (38.1%); and Rochester, New York (37%).

Going against the trend were the markets of Davenport, Iowa (rate up 18.5%); Hilton Head, South Carlina (up 16.8%); Scranton, Pennsylvania (up 12.2%); Amarillo, Texas (up 10.9%); and Kalamazoo, Michigan (up 7.7%).

Returns Rise in More Than 7 Out of 10 Markets

In Q3, the median sale price of homes that were considered flips were pegged at $240,000, following a median purchase price of $166,234. This accounted for the highest ROI on flipped homes since Q1 2018, when the ROI rate was roughly 48%.

The markets with the largest overall increases included Brownsville, Texas (return on investment 182.9%); Austin, Texas (176.4%); Waco, Texas (157.4%); Springfield, Missouri (145.3%); and Savannah, Georgia (143.6%).

Aside from Austin, metro areas with a population of at least 1 million that had the biggest annual increases in flipping profit margins in Q3 were Raleigh, North Carolina (ROI up 74%); Phoenix, Arizona (up 69.8%); Kansas City, Missouri (up 55.9%); and Las Vegas, Nevada (up 54.4%).

Some markets saw a decline in ROI, however, such as Corpus Christi, Texas (ROI down 77%); Hilton Head, South Carolina (down 72.9%); Boulder, Colorado (down 69.1%); Wilmington, North Carolina (down 58.9%); and South Bend, Indiana (down 54.1%).

Sales Price Twice Purchase Price in 14 Markets

Some markets were red hot with price increases. Among them were Pittsburgh, Pennsylvania (151.9% return, up from 127.9% in the third quarter of 2019); Hickory, North Carolina (136.3% return, up from 110.3% a year ago); Scranton, Pennsylvania (117.1% return, up from 104.2% a year ago); Davenport, Iowa (114.7% return, up from 52.3% a year ago); and McAllen, Texas (108.9% return, up from 81.2% a year ago).

Trends suggest these markets will be just as lucrative in 2021.

Investment Outlook

As always, investing strategies differ from investor to investor, but at its core, the idea is to buy low and sell high. As of right now, most markets will allow investors to sell high as buyers frantically search for new homes. Even better, most higher-priced sales are not concentrated in the largest and wealthiest markets but are more evenly distributed due to a remote economy.

This means that, for investors, it’s time to sell. Buying might not be in your best interest at the moment, considering we don’t know what will happen in 2021 with the pandemic or how the new presidential administration will respond to current policies. Besides, prices are likely at their highest level as we stand.

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