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House flippers 'surprisingly unaffected' by COVID-19, but brace for mixed bag in months to come

Milan Polk, Chicago Tribune on

Published in Business News

CHICAGO -- Born from the burgeoning real estate market that preceded the Great Recession, flipping homes has become a national fascination over the past two decades. Thrifty bargain hunters scooped up foreclosed or decrepit properties, renovated them and quickly resold for a tidy profit.

The good news for those who have made a career out of the practice: It seems, at least for the time being, that house flipping has proven relatively pandemic-proof.

"My business has been surprisingly unaffected," said Andy Goldman, whose family has been in the house-flipping business since the 1980s.

In the first three months of 2020, 7.5% of homes sold in the United States were flipped, according to a June report from real estate research firm ATTOM Data Solutions. That's the highest rate since 2006 and a jump from 6.3% at the end of 2019.

Home flipping rates had dropped drastically in 2007 and began to gradually recover in 2010. The number of flipped homes sold in a quarter peaked around 100,000 in 2005, and while it was on the rise in recent years, a decline began in the second quarter of 2019. In the first quarter of 2020, 53,705 single-family homes and condos were flipped, according to the report.

Profit margins have also dropped since 2019, hitting the lowest return-on-investment since 2011. After plummeting with the national economy between 2006 and 2008, profit margins on flipped homes grew at a steady rate until 2017. But since then, return-on-investment has been on a decline.

 

Still, it's too soon to fully grasp how the coronavirus pandemic will impact the house flipping market through 2020 and beyond, ATTOM chief product officer Todd Teta said in a statement.

"Profits are down and are lower than they've been since the dark days following the Great Recession," Teta said. "Enter now the coronavirus pandemic, and the prospects for house flipping are notably uncertain, at least in the short term."

The coming months will be key in determining whether home prices will plummet, harming investors, or remain steady, Teta said. And as COVID-19 cases ebb and flow, it's impossible to know what's next.

"The future is just so hard to predict," Goldman said. "It's just up to seeing what the economy's going to look like, you know?"

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