HOME FLIPPING SALES, PROFIT MARGINS BOTH DECLINE ACROSS U.S. IN 2020
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TTOM Data Solutions released its year-end 2020 U.S. Home Flipping Report, which shows that 241,630 single family homes and condos in the United States were flipped in 2020, down 13.1 percent from 2019 to the lowest point since 2016. The number of homes flipped in 2020 represented 5.9 percent of all home sales in the nation during the year, down from 6.3 percent in 2019 to the same percentage seen in 2018. The declines in the number of homes flipped in 2020, as well as the portion of home sellers represented by investors, marked the first time since 2014 that both measures decreased annually. While flipping activity declined, gross profits and profit margins shifted in opposite directions. Profits rose in 2020, but profit margins dipped – the third straight year that returns on investments declined. Homes flipped in 2020 typically generated a gross profit of $66,300 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was up 6.6 percent from $62,188 in 2019 to the highest point since at least 2005.
ROI DROPS But the typical gross flipping profit of $66,300 translated into just a 40.5 percent return on investment compared to the original acquisition price. The latest ROI (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was down from 41.5 percent in 2019 and from 46.4 percent in 2018. The 2020 ROI was off more than 10 percentage points from peaks over the past decade in 2016 and 2017. The 2020 figure also stood at the lowest point since 2011.
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www.midsouthmortgageexpo.com Investors saw their profit margins dip again during a year when the median value of the homes they flipped rose more slowly than the median price they paid to purchase properties – 8.4 percent versus 9.1 percent. The decline in home-flipping profits marked a rare weak spot in the U.S. housing market, which otherwise boomed in 2020 despite economic damage caused by the worldwide Coronavirus pandemic.
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