How strong is the real estate market? One sign is the number of homes that are “flipped,” which means people buy a home to quickly resell it at what they hope is a much higher price. In the third quarter, this was 5.7% of all home sales, according to the third-quarter 2021 U.S. Home Flipping Report from real estate research company ATTOM.
The housing market has been on fire for over a year. Home prices surged 19.5% in September, compared to the same month last year, according to the S&P CoreLogic Case-Shiller Index. Of the large cities the research tracks, Phoenix prices rose the most for the period, up 33.1%. There is evidence that in some smaller cities, prices are rising even faster. One reason for this is low mortgage rates. Despite a rise in overall interest rates, home loan rates remain near a multidecade low.
The median gross profit on flipped homes in the third quarter was $68,847. This is defined as “the difference between the median sales price and the median paid by investors.” The median price of a flipped home was $281,847. That makes for a margin of 32.3%. While flipping can be risky, clearly there can be huge rewards.
For the most part, home flipping has become more popular in America’s 200 largest cities. ATTOM only looked at markets where at least 50 homes were flipped in the third quarter. Activity rose in 142 of the 195 markets for which there were data.
The cities with the highest flip rate in the period were Ogden, Utah, and Phoenix, Arizona, each at 9.5%. Interestingly, Case Shiller reports that home prices increases in Phoenix were the highest among all large cities at 33.1% in September.
Returns on investment in the quarter were highest in Buffalo (130.6%) and Oklahoma City (127.6%).
The highest raw profits for flipped homes by metro put San Jose at the top of the list with $213,000. Several studies show it is the most expensive housing market in the country.