RALEIGH – Nationally, the typical house “flipped” by a real estate investor is generating 18% less in gross profit than a year ago, at $67,000 in gross profit for the typical home.
But in North Carolina, the increase in gross profits on the typical house bought, renovated, and then resold by an investor, was 16% and in the second quarter, the typical home in North Carolina returned a gross profit of $68,500, representing a gross return on investment of nearly 40%.
That’s according to new data from ATTOM Data Solutions, which WRAL TechWire received upon request. The data set tracks properties that were purchased, then were sold again in 12 months following the end of the quarter in which the house was originally purchased.
In North Carolina, whether the typical property is increasing or decreasing this type of real estate investor’s gross profits or gross return on investment depends a lot on one thing: where the property is located.
Based on the data from ATTOM Data Solutions, the typical property in the Durham-Chapel Hill generated 92% higher gross profit return than a year ago, while typical returns were 82% more in the Raleigh-Cary metro area.
But that’s not the case everywhere in North Carolina, as typical investment returns were down year-over-year by 32% in Greensboro-High Point, down 67% in Wilmington, and down 71% in Hickory.
In Asheville, the typical home flip in the second quarter of 2021 generated a gross profit of $99,500, which boosted the return on investment by 30% year over year. It also produced the highest raw profit of any market tracked in the data set.
Properties in Durham-Chapel Hill generated a median gross profit of $94,500, and in Raleigh-Cary, properties generated a median gross profit of $53,000.
“The relative strength of local economies would, of course, be a key factor driving investment decisions for home flippers,” said Todd Teta, Chief Product Officer at ATTOM Data Solutions. “A healthy or improving local economy means more people moving in and more potential customers for renovated homes. So, investors would certainly take that into account when deciding where to buy and sell.”
Now, investors may also look at the data, as flippers aren’t guaranteed to increases gross profit margins in all North Carolina markets, according to the data set. For example, the gross profits on a typical flip in Greensboro-High Point are down year-over-year by 32%, down 67% in Wilmington, and down 71% in Hickory.
Housing boom over? Triangle prices fall in August but agents aren’t panicking
“Home flipping profit margins across North Carolina generally reflected national patterns, with five of the nine metro areas in the state showing declining profit margins, measured year over year, during the second quarter of 2021,” said Teta. Nationwide, about 70% of regions with enough data to be included in the company’s data set saw profit margins or return on investment drop during that time, said Teta.
“At the same time, though, home flippers earned better profit margins than investors nationwide in a majority of North Carolina metros,” said Teta. “The typical flip generated more than the 33.5% national return in seven of the nine North Carolina metros measured.”
In terms of gross profit, the best performing real estate market for house flippers in North Carolina was in Asheville, where the typical home flip in the second quarter of 2021 generated a gross profit of $99,500, up 30% year over year, and the highest dollar amount, on average, of any market tracked in the data set.
Properties in Durham-Chapel Hill generated average gross profit of $94,500, and in Raleigh-Cary, properties generated average gross profit of $53,000.
Wilmington was among the top five markets tracked nationally by ATTOM Data Solutions where flipping occurred the least, as a percentage of all second-quarter 2021 sales.
A prior ATTOM Data Solutions report identified the Triangle as a place where institutional investors were increasing their transaction activity, with 10.3% of the transactions in Raleigh during the second quarter being purchased by such an entity. How much of an increase is this? According to the data set, 234%.
Both reports include the activity of iBuyer companies, which a Zillow analysis recently found represented 5% of all transactions in the Raleigh region, which included Wake, Franklin, and Johnston Counties, five times the national average in markets where iBuyers are operating.
Are we in the midst of a real estate bubble? At event, developers disagree.
The market remains competitive, despite fluctuations in the median sale price of residential property, which fell month-over-month in August for the first time in 2021, to $351,000 on 4,337 sales from 4,192 closed sales in July 2021 with a median sale price of $355,000.
But indicators in the market still indicate that the Triangle is facing a housing shortage, not in the midst of a housing bubble, said Jim Allen, president of the President at The Jim Allen Group, at a virtual event this week.
“Pricing is just beginning to rise, I think it will take a decade to smooth out,” said Allen. “We are still very affordable, but don’t expect current pricing to slow down any time soon.”
And the indicators that agents track bear that out, Courtney Brown, a real estate agent with Hunter Rowe, told WRAL TechWire this week.
“First of all we are still in a strong market with low days on market, very low inventory, and still with 104% sale to list price,” said Brown. “I would not read that the average sales price dropping slightly means that we are in a less competitive market.”
By another measure, an internal analysis of Redfin’s agent data, Raleigh is now considered the most competitive market of 48 markets tracked in the company’s data set. The analysis found that 86.7% of all offers written by a Redfin agent for a property in the region faced competition from other buyers, outpacing second-ranked Silicon Valley by 16 percentage points.
And Zillow’s recently released home value index measured an increase in home values in Raleigh, despite the market data from TMLS indicating a drop in median sale price. The Zillow data measured a 3.6% increase in home value in Raleigh, with a rent growth of 2.5% in the region, estimating the average home value at $363,693, up 23.4% year-over-year.
