Profit Margins On Home Flips Sink to 13-YR Low

Home flippers are feeling the sting of the housing market correction, seeing flips fall for a second consecutive quarter as typical profit margins on resold homes hit a 13-year low.

ATTOM’s Q3 U.S. Home Flipping Report found that 7.5% of all home sales last quarter were flipped homes, down from 8.2% in Q2.

Flipping remains at its third-highest level in ten years, up from last year when flips accounted for only 5.9% of sales. Its highest was in Q1 2022, at 9.7%.

As turnarounds dropped, so did investors’ profits. Typical gross profits fell to their lowest point in nearly three years – $62,000 – and at the fastest pace since 2009.

Profit margins also dropped to their lowest point in 13 years, down to a 25% ROI. This is less than half the peak over the past decade of 53.1% in 2016.

Typical returns were less than 25% in almost half of all U.S. metros, compared to just a third earlier this year.

Investors in the South and Northeast saw the most returns.

“It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market,” said Rick Sharga, executive vice president of market intelligence at ATTOM. 

“With demand from buyers weakening, prices trending down over the past few months, and financing rates significantly higher than they were at the beginning of the year, flippers face a much more difficult environment today, and probably will in 2023 as well.”

Home price appreciation is now half of what it was in April, its lowest recorded point since early 2021.

A record number of homes are being delisted as sellers face a sharp drop in demand and see smaller offers.

“Some sellers are having a hard time grasping that we’re not in a housing-market frenzy anymore — it’s tough for them to swallow that they missed the boat on getting a high price,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida.

Flips are seeing the same trouble. One Houston-based flipper told Business Insider he sold a home for $50,000 less than expected earlier this year, with no margin at all.

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