In the hot housing market, here are 5 areas with the highest levels of turnaround activity
The coronavirus-linked housing market has brought many surprises, including this one: As house prices skyrocketed, the share of homes bought and then quickly resold by investors fell in 2020.
Flips accounted for just 5.9% of all home sales nationwide in 2020, up from 6.3% in 2019, according to ATTOM Data Solutions. It was the first time since 2014 that the turning activity decreased.
“Last year was a banner year for the US real estate market, with the apparent exception of home flipping activity,” said Todd Teta, director of products at ATTOM.
However, a few markets – including Memphis, the suburbs of Washington, DC, and the suburbs of Atlanta – have seen intense reversal activity in 2020. And hard money lenders – financiers who finance fins – aggressively market their services to real estate investors.
“We’re all trying to unlock the hidden value of homes across the country,” says Michael Bourque, managing director of LendingHome, a lender specializing in investor loans. “About two-thirds of the housing stock in this country is 30 years or older. It just creates a huge opportunity for investors to create ready-to-move-in homes. “
The flipping activity is still a double-edged sword. In a housing market characterized by an intense shortage of stocks, the fins may give way to some buyers. On the flip side, many of the homes bought by investors are lower value properties in need of major renovations.
Figures in many metropolitan areas support the idea that palms are buying homes that otherwise might not be marketable. In Detroit, Fins paid a median of $ 50,000 for homes last year and then resold for a typical price of $ 98,950, according to ATTOM Data Solutions. In Dayton, Ohio, the typical purchase price before the turnaround was $ 60,000.
5 metropolitan areas with the most flips
ATTOM defines a flip as any subsequent sale and resale within one year between unrelated parties. Among counties with more than 500,000 inhabitants, here are the five that had the highest levels of turnaround in 2020:
- Memphis. According to ATTOM Data Solutions, 13.8% of homes sold in Shelby County last year were flips. The fins nearly doubled their money – after paying a median of $ 67,000, investors sold for $ 126,000, a gain of 88%.
- Prince George County, Maryland. In this county of 900,000 people near Washington, DC, 11.2% of last year’s sales were flips. The typical purchase price: $ 199,500. Typical resale price: $ 331,750.
- Camden, New Jersey. In this area directly across from Philadelphia, 10.4% of last year’s sales were flips. Typical purchase price in Camden County: $ 97,100. Typical Resale Price: $ 201,000.
- Baltimore. The city has seen a lot of bargain hunting flippers activity. Flips accounted for 9.9% of sales last year. Typical purchase price: $ 62,500. Typical Resale Price: $ 155,000.
- DeKalb County, Georgia. In that county near Atlanta, 9.9% of last year’s sales were flips. Typical purchase price: $ 142,100. Typical Resale Price: $ 207,000.
While Phoenix sits just outside the top five, the huge Maricopa County (4.3 million people) recorded the most flip count of any US county, at 9,237.
Overall, 9.5 percent of sales in Maricopa County were flips, although the gains were relatively modest. The typical investor’s purchase price was $ 245,500 and the typical resale amount was $ 298,000.
Phoenix remains the epicenter of IBuying activity. Opendoor, Offerpad, Zillow Offers and Redfin Now purchases accounted for 2.1% of transactions in Phoenix in the fourth quarter of 2020, according to a study by Redfin. It was the highest level in any metropolitan area.
Inexpensive homes attract attention
Palms flocked to lower-value housing markets because they got more for their money, Teta says. Baltimore Fins reported 146% gross profit, while Camden County Fins sold for 107% gross profit.
These figures do not include the costs of construction, borrowing, property taxes or insurance. Hard money lenders typically charge interest rates of 7-10%.
Nationwide, homes returned in 2020 generated annual gross profit of $ 66,300, according to ATTOM Data Solutions. This resulted in a return on investment of 40.5% compared to the initial purchase price.