The number of homes being flipped in North Texas has more than doubled since a year ago as investors take advantage of the region’s growth in home prices.
Investors flipped a record 2,675 Dallas-Fort Worth single-family homes and condos in the first quarter, representing about 13% of all sales in the area, according to new data from Attom Data Solutions. The number of flips was about 133% more than in first-quarter 2021.
These homes were typically purchased for $297,830 and sold for $342,500, meaning a gross profit of $44,670 for flippers — not counting renovation costs or other expenses — according to Attom.
The flipped properties in North Texas were typically 1,802 square feet and built in 1992.
Attom defines home flips as properties that have seen multiple transactions within the past 12 months.
Nationally, flips represented about 10% of all home sales, and gross margins for investors dropped to their lowest point since 2009. Almost two-thirds of the flipped homes were purchased with cash.
Dallas-Fort Worth was one of the few markets in the US that saw an increase in margins, which were up 11% from a year ago.
“The good news for fix-and-flip investors is that demand remains strong from prospective homebuyers, as evidenced by this quarter’s report, which shows that one of every 10 homes sold during Q1 was a flip,” said Rick Sharga, executive vice president of market intelligence for Attom, in a statement. “The bad news is that rising mortgage interest rates are beginning to slow down home price appreciation rates, and buyers have become more selective — and less willing to outbid other buyers for properties they’re interested in. This is having a predictable impact on profit margins for investors.”
In a separate report, data firm Kukun said low inventory and strong price growth across the US may have caused speculators to join in, holding onto homes just to resell rather than renovating them.
That report pointed to several signs of speculation. It found that flippers have seen little to no returns above general home price appreciation, that more homes are being flipped in shorter periods of time and that flippers applied for building permits at near the lowest rate on record in the first quarter. As of March 2022, only 14% of flippers in Dallas-Fort Worth applied for permits on their properties, according to Kukun.
“While not definitive, we believe these are some of the first signs of speculation in the US housing market since the Great Recession,” Kukun’s report said, noting that some flippers may have entered the market with the intent to renovate but that shortages in contractors and materials may have led them to pursue smaller projects that don’t require permits.
Companies focused on home flipping are growing rapidly. Irving-based New Western has bought more than 40,000 homes throughout the country to sell to flippers since it was founded in 2008 and said it plans to expand its footprint from 40 to 80 locations this year. Backflip, a Dallas-based startup with an app that helps members buy homes to renovate, launched to the public this month after securing $35 million in funding.
At 52%, Tarrant County ranked third nationwide for the share of homes purchased by investors, companies or corporations last year, according to a report by the National Association of Realtors. Last year, such entities purchased 45% of homes in Rockwall County, 43% in Dallas County and 39% in Denton County.