Home flipping, the practice of buying and then reselling the same property within a 12-month period, fell to the lowest level in two years during the first quarter of 2017. At the same time, the share of those "flips" using mortgage financing rose to a nine-year high.

ATTOM Data Solutions (formerly RealtyTrac) noted the anomaly in its Q1 2017 U.S. Home Flipping Report.  The company said that there were 43,615 single family homes and condos flipped during the three-month period, down 8 percent from the previous quarter and 6 percent from a year ago.  It was the fewest such transactions since the first quarter of 2015. Flipping accounted for 6.7 percent of all single-family home and condo sales during the quarter, an increase from 5.8 percent in Q4, but unchanged from a year earlier.

Financing was involved in exactly one-third (33.3 percent) of the initial purchases.  It was the highest percentage since the third quarter of 2008, the start of the housing crisis, when 37.6 percent of homes that were eventually flipped were financed.  In the fourth quarter of 2016 31.9 percent of flips used a mortgage and in the first quarter of 2016 the percentage was 29.5.

"The business of financing for home flippers continued to grow in the first quarter of 2017 even as the home flipping rate plateaued compared to a year ago and average home flipping returns decreased for the second consecutive quarter," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "Home flippers financed an estimated $3.5 billion in purchases for homes flipped during the quarter, up from $3.3 billion in the previous quarter and up from $2.4 billion a year ago to the highest level since the fourth quarter of 2007 - a more than nine-year high."

The District of Columbia had the highest home flipping rate in the nation in the first quarter (10.7 percent), followed by Nevada (9.8 percent); Alabama (9.0 percent); Tennessee (8.9 percent); Maryland (8.5 percent); and Missouri (8.0 percent). Among the 85 metropolitan statistical areas (MSAs) with at least 90 single family and condo home flips completed in Q1 2017, the highest rates were in Memphis, (15.1 percent); York-Hanover, Pennsylvania (12.5 percent); Fresno (11.1 percent), Birmingham (10.3 percent), and Las Vegas, (10.0 percent).

Those were not, however, the areas with high rates of financing. That honor goes to areas where other sources have said prices are increasing the most rapidly.  Colorado Springs had the highest percentage of mortgages financing, 69.3 percent, followed by Denver with 54.8 percent, and Seattle (51.6 percent.  Other high percentages were noted in Boston (51.3 percent), and Providence, Rhode Island (47.3 percent).

Homes flipped in the first quarter of 2017 were sold for a median price of $200,000, posting a gross profit of $64,284 above the median purchase price of $135,716. It was a new high in records that go back to the first quarter of 2000.  In the fourth quarter of 2016 the median profit was $63,500, and flippers grossed $59,100 in the first quarter of last year. The average gross return on investment (ROI) declined however, to 47.4 percent, from 49.0 percent in Q4 and 48.5 percent a year earlier.  It was the second consecutive quarter where the year-over-year ROI declined. The states with the highest ROI were Pennsylvania at 107.1 percent, Ohio, 96.3 percent; and Louisiana, 96.0 percent.

ATTOM said that most of the first quarter flippers completed only one such transaction during the quarter (69 percent) and one fourth of the completed transactions were cash sales, indicating the property was flipped to yet another real estate investor.