House Flipping in Today's Market

It's no surprise that home flipping is trending downward in many parts of the country this year. It is especially true on the Monterey Peninsula as home prices continue to soar. Here are a few contributing factors that are creating some obstacles:

• Home prices are rising

• Cost of materials such as lumber, steel etc... are at an all time high and although recent news indicates that prices are starting to correct, it's an expensive time to buy materials

• Material delivery delay - shortages & shipping challenges are creating longer waits. Appliances can take up to 12-16 weeks, cabinets are 10 weeks+

• Contractors & crews are in short supply

• Cities are still catching up from COVID so permits & inspections are back logged

An investor will need to carefully consider timing and holding costs. Financing a flip can be risky especially if permits or materials are delayed. Home flippers who sold in the first quarter took an average of 159 days to complete the transaction, the lowest since the third quarter of 2013, according to ATTOM Data Solutions.

In addition, gross profit on a typical U.S. home flip fell in the first quarter to $63,500, or about a 38% return on investment compared to the original acquisition price, according to ATTOM Data Solutions’ Q1 2021 U.S. Home Flipping Report. The gross flipping ROI reached its lowest point since the second quarter of 2011.

Source: “Top 10 U.S. Housing Markets With Fastest Times to Flip” ATTOM Data Solutions (July 2, 2021)