Investors flipped less homes during the second quarter as the returns decreased for the third consecutive quarter, according to the Q2 2017 U.S. Home Flipping report from ATTOM Data Solutions, a multi-sourced property database.

Home flipping dropped to 5.6% of all home sales during the second quarter, or 53,638 single-family homes and condos, down from 6.9% in the first quarter but unchanged from last year.

According to the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period. The information is based on publicly recorded sales deed data collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80% of the U.S. population.

Not only is home flipping down overall, but the average gross flipping profit also decreased for the third consecutive quarter, falling to $67,516 during the second quarter. This represents a 48.4% return on investment for flippers, down from 49% the previous quarter and 49.6% from the second quarter last year to the lowest level since the third quarter of 2015.

“Home flippers are employing a number of strategies to give them an edge in the increasingly competitive environment where flipping yields are being compressed,” ATTOM Senior Vice President Daren Blomquist said. “Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available, often due to foreclosure or some other type of distress.”

“Many of those lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals,” Blomquist said. “In markets where distressed discounts have largely dried up, flippers are showing more willingness to leverage financing when acquiring properties, often purchasing closer to full market value and then relying more heavily on price appreciation to fuel their flipping profits.”

As the market share and number of home flippers drop, the dollar volume of home flipper financing climbed to nearly a 10-year high.

More than 35% of homes flipped in the second quarter were with financing, up from 33.2% in the previous quarter and 32.3% last year. This also marks the highest level since the third quarter of 2008.

The dollar volume of this financing increased to $4.4 billion, up from $3.9 billion in the first quarter and from $3.4 billion in the second quarter of 2016, reaching the highest level since the third quarter of 2007, a nearly 10-year high.

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Returns from home flipping drop for third consecutive quarter