According to a story published by CNBC, “House flipping has seen a huge run-up in the past few years, as investors take advantage of tight supply in the market and fast-rising home prices.” 
The story even credits the popularization of home renovation and house flipping shows as fueling the trend. The influx of many “frontier home-flippers” is actually having an impact upon the market.
After two consecutive years of gains, the rate of home flipping flattened in the second quarter of 2017, according to a new report from Attom Data Solutions.
CNBC reports that, “Nationwide, 53,638 single-family homes and condos were flipped in the second quarter, which is 5.6 percent of all home sales during the period. That rate was down from 6.9 percent in the previous quarter and unchanged from a year ago.”
The definition of a house flip is when a property is bought and sold within the same calendar year.
- Home flippers saw an average gross return of $67,516 in the second quarter, representing a 48.4% return on investment.
- Surprisingly, this is down from 49% in the previous quarter and down from 49.6% in the second quarter of 2016.
- This marks the lowest return in nearly two years.
- The peak return of 51.1% was recorded in the third quarter of 2016.
- The average gross flipping returns nationwide have decreased for three consecutive quarters.
The reason attributed to the decrease in the return-on-investment is the rising cost to purchase a potential property to flip.
Home prices jumped by 6.7% in July on an annual basis.
According to Daren Blomquist, senior vice president at Attom Data Solutions, “Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available — often due to foreclosure or some other type of distress. Many of those lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals.
Flippers are also relying on other forms of financing such as low down payment FHA mortgages and small groups of investors looking for a steady rate of return for the short-term. In the more expensive regions, like Denver, Seattle and Boston, more than half of flips were financed with mortgages.