As resale house inventory becomes tighter, smart flippers are making more money. Are you among these? “Home flippers are realizing a much bigger gross ROI in 2016, averaging 49% in the first two quarters,” says Daren Blomquist, ATTOM Data Solutions SVP. (Average 2006 gross ROI was 27%.) “An increasing number of flippers are financing their purchases, more than two-thirds still use cash compared to about one-third using cash to purchase back in 2006.”
Attom Data Solutions, the new corporate parent name for RealtyTrac, reports that there are more flippers participating in the market in Q’2 2016. “The total number of investors that completed at least one home flip increased to 39,775, the highest number of home flippers since 2007,” says Blomquist.
Because RealtyTrac has been a consistent source of data we have this to help scope the size of the fix and flip and F&F finance market.
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RealtyTrac reports that home flipping sales increased to 51,434 single-family homes and condos in Q’2 adding 14% over the Q’1 run rate of 44,234 homes sold. Averaging these two number is predicts the fix and flip sales run rate for 2016 to be at 191,000, or 1% ahead of 2015.
Homes flipped in the second quarter made up 5.5% of total home sales. This is down from 6.7% of total home sales last quarter, but up from 5.4% in the second quarter of 2015.
SHOULD INVESTORS BE CONCERNED?
“Home flipping is becoming more accessible …. with more loan options for real estate investors, who are also benefitting from the historically low mortgage interest rates,” said Blomquist.
“We’re starting to see home flipping hit some milestones not seen since prior to the financial crisis, which is somewhat concerning, but there are a couple of important differences in the home flipping of 2016 compared to 2006 when home flipping peaked during the last housing boom,” Blomquist said. In Q’2 2016 investors using cash decreased to 68.3%, down from 71.1% last quarter and 69.6% last year. This marks the lowest level of those using cash for their investment since 2008 and is probably a result of growing investor sophistication, more entrepreneurial loans and the desire to use leverage to get better returns.
If you are in need of a fix & flip loan, 3L Finance can help. Go here.
*(The industry defines flips as a property that is sold in an arms-length sale twice in a 12-month period based on publicly recorded sales and deed data. Attom collects data from the 950 (of 3200) most populous counties where 80% of the U.S. population lives.)