As the turnaround rate increased, profit margins fell to their lowest level in 10 years, according to the report. Gross profit on the typical home flip rose in the second quarter to $67,000, up 2.4% from $65,400 in the first quarter and 3.1% from $65,000 a year to year.
However, that typical gross profit of $67,000 translated into a return on investment (ROI) of 33.5% over the original acquisition price. That’s down from 37.2% in the first quarter and 40.6% a year ago, its lowest point since the first quarter of 2011.
The median reverse home price in the second quarter reached an all-time high of $267,000, up 10.6% from $241,400 in the first quarter and 18.7% from $225,000 a year earlier. year to year. But those price increases failed to outpace the increases investors were absorbing — 13.6% per quarter and 25% per year — when they bought the homes they sold in the second quarter. This discrepancy resulted in lower profit margins.
“The home turnaround rebounded in the second quarter. But profits certainly didn’t, as the typical home flip across the country generated the smallest return on investment in a decade,” ATTOM Chief Product Officer Todd Teta said in a statement. “However, it’s not as if the home flip has become a losing proposition. A 33% profit on a short-term investment remained pretty decent even after renovation and holding expenses. But with a few extra periods like the second quarter of this year, investors may need to reframe their view of these deals. »
At-home rollovers increased from the first to the second quarter in 144 of the 182 metropolitan areas analyzed by ATTOM (79%). Among these metro areas, the highest turnaround rates were in Savannah, Georgia (9.5% of all home sales); Fort Wayne, Indiana (9.3%); Canton, Ohio (9%); Ogden, Utah (8.9%) and Indianapolis (8.9%).
The lowest home rollover rates in the second quarter were in San Jose, California (1.8%); Rochester, NY (1.9%); Albany, New York (2.1%); Bakersfield, California (2.1%) and Wilmington, North Carolina (2.2%).
The metro areas with the greatest ROI on home flips in the second quarter were Oklahoma City (196.4%); Fargo, North Dakota (185.7%); Pittsburgh (154.2%); Omaha, Neb. (135%) and York, Pennsylvania (115.1%).
The metros with the smallest profit margins on home flips were Gulfport, Miss. (7.8% loss); Corpus Christi, Texas (0.7% return); College Station, Texas (1.2% return); Longview, Texas (7.1% yield) and Daphne-Fairhope, Ala. (8.5% yield).