1Q Home Flipping: Numbers Up, Profits Down
Home flips vary by metro, but they’ve grown as a percentage of sales (9.6%) for five straight quarters – but profit margins dipped to their lowest point since 2009.
IRVINE, Calif. – June 23, 2022 – Attom’s first-quarter (1Q) 2022 U.S. Home Flipping Report finds that, as a percentage of sales, home flips have increased in all of the last five quarters, but profit margins have been dropping for the past six quarters.
In the first quarter, Attom found 114,706 single-family houses and condominiums in the United States flipped, or one in 10 transactions (9.6%). It’s the highest level since at least 2000 and an increase from 6.9% in the fourth quarter of 2021 and 4.9% one year earlier.
However, profit margins dipped to their lowest point since 2009.
“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,” says Rick Sharga, executive vice president of market intelligence for Attom.
“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.”
Among all flips nationwide, the gross profit on typical transactions – the difference between the median purchase price paid by investors and the median resale price – stood at $67,000 in the first quarter of 2022. While that’s up 5.5% from $63,500 in the fourth quarter of 2021, the first increase since late 2020, it was 4.3% less than the $70,000 level recorded in the first quarter of 2021.
Profit margins, meanwhile, fell for the sixth quarter in a row. The typical gross profit translated into just a 25.8% return on investment (ROI). That’s down from 27.3% in the fourth quarter of 2021 and 38.9% one year earlier, and it’s the lowest point since the first quarter of 2009. The peak so far this century is 53.1%, which hit in late 2016.
Profit margins declined in the first quarter of 2022 as resale prices on flipped homes continued to shoot up more slowly than they were when investors originally bought their properties.
Home flipping increased in 95% of local U.S. markets. In Florida, Jacksonville was in the top five for its percentage of flips in 1Q, 16% of all sales. Phoenix led the list with 18.7% of all home sales going to flippers.
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