The number of people trying to flip homes is at the highest level in nine years, and they are increasingly using mortgages—rather than cash—to finance their investment.
A total of 39,775 investors—which includes individuals and institutions--completed at least one home flip in second quarter, the highest amount since the second quarter of 2007, according to a new report from ATTOM Data Solutions. That’s still well below the numbers seen in 2005 and 2006 during the run-up and peak of the last housing bubble.
Of the homes flipped in the second quarter, 68.3 percent were purchased with cash by the flipper, the lowest level in almost eight years. ATTOM defines a flip as a property that is sold in an arms-length transaction for the second time within a 12-month period.
“Home flipping is becoming more accessible for smaller operators thanks to an increasingly competitive lending environment with more loan options for real estate investors, who are also benefitting from the historically low mortgage interest rates,” said Daren Blomquist, senior vice president at ATTOM Data Solutions in a statement. “That … has helped to fuel the recent flipping frenzy we’ve seen over the past five quarters.”
Blomquist is quick to point out that this flipping activity shouldn’t be concerning. First, the average return on investment today is 49 percent, which is much higher than the 27 percent in 2006, during the height of the bubble. And even though more flippers are using mortgages, the vast majority—more than two-thirds—are still paying cash for investment purchases. In 2006, only a third used their own money.
There were other milestones in the second quarter for home-flipping. The average gross profit hit a new all-time high of $62,000. But it took 185 days on average to complete a flip, the most amount of time since the second quarter of 2006.
The metros with the highest share of flipping activity were Memphis, Tennessee; Visalia-Porterville, California; Tampa, Florida; York-Hanover, Pennsylvania; and Mobile, Alabama.