Home Flippers Leave the Market as Flipping Profits Shrink
A combination of higher costs and lower demand is causing home flippers to flee the market. Home flips, which are defined as homes that are purchased and sold within a 12-month period, declined 18 percent nationally in August 2018 as compared to the same period in 2017, according to Attom Data Solutions.
Home flipping volume has been declining by double-digit percentages for three of the past six months. Gross flipping returns fell to their lowest level in August. It also takes an average of 186 days to sell a flipped home, which is the longest since June 2006.
“It’s not only becoming more expensive on the purchase side of flipping, but it’s becoming more expensive on the fix-up side of flipping,” said Mark Bethanis, a Los Angeles-area contractor, who has flipped homes for 30 years.
Home prices have risen to record highs in the past two years and now mortgage rates are also on the rise. Labor and materials costs are up. Flippers also have less inventory to choose from as the national foreclosure rate is low and older homeowners who might have downsized in the past are now staying in their homes.
Home flipping activities are also now more organized than they were following the 2008 real estate crisis. While independent contractor crews were doing most of the work then, now there is significant competition from large-scale flipping companies.
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