Home pinball profits are down, but business is increasing »RealtyBizNews: Real estate news
Home fins are strengthening their presence in the real estate market at a time when profits have plunged to their lowest level in a decade.
About 4.9% of all second quarter home sales were home flips, which ATTOM Data Solutions defines as a home or condo that was bought and then resold within 12 months. This represents only 3.5% of all home transactions in the first quarter of the year, although home turnaround activity is still lower than it has been for most of the past decade.
Perhaps the most interesting discovery of ATTOM US Home Turnaround Report 2021 is that home pinball machines are seeing their flip profits decline. According to the report, the gross margin on a typical home flip – which is the difference between the median selling price and the median paid by the pinball machine – was $ 67,000 in the second quarter. This is a return on investment of 33.5% compared to the initial purchase price. Still not bad, but down from 40.6% a year earlier and the lowest point since the first quarter of 2011.
The decline in profitability is explained by the rise in house prices. The median home price overturned in the second quarter hit an all-time high of $ 267,000, up 18.7% from a year ago. Those price increases, however, did not exceed the increases investors were absorbing when they bought the homes they sold in the second quarter, according to the study. The gap – with prices increasing more at buy than at resale – has resulted in lower profit margins, the researchers note.
“The home turnaround rebounded in the second quarter, but earnings did not,” said Todd Teta, chief product officer at ATTOM. “The typical home turnaround across the country generated the smallest return on investment in a decade. However, it’s not as if home flipping has become a losing proposition. A 33 percent profit on a short-term investment was still pretty decent, even after the renovation and holding costs. But with a few extra periods like the second quarter of this year, investors may need to reframe how they view these deals. “
The ATTOM report highlighted Savanna, Georgia; Fort Wayne, Indiana; Canton, Ohio; and Indianapolis as the most popular markets for home pinball machines, with flips accounting for nearly 9% of all residential property sales there. The highest return on investment for fins was found in Oklahoma City, where the fins generated a median return on investment of 196.4%, according to the report. Other markets including Fargo, ND; Pittsburgh, Pa .;, Omaha, Nab; and York, PA has also seen fins enjoy more than 100% returns, according to the report.