While low inventory, high prices and high mortgage rates have made life difficult for the real estate industry, investors in one segment — home flipping — are seeing better returns.
Attom‘s home-flipping report for the first quarter of 2024 shows that the typical gross profit for investors from January through March was 30.2%. This marked the third time in four quarters that profits increased. In the first quarter of 2023, margins were at a decade low of 25%.
In raw dollars, a typical flip at the national level netted $72,375 in the first quarter of this year. That’s up from $65,000 in the previous quarter and closer to the 2022 peak of $80,000.
Fix-and-flippers are benefiting from rising prices and affordability issues for prospective homeowners. Flips comprised 8.7% of all U.S. home sales in the first quarter, up from 7.7% in the previous quarter. But the number was down from 9.8% in Q1 2023.
The total volume of flips remains drastically below the peaks of 2021, although they are in line with pre-pandemic volumes. Still, flippers are facing the same headwinds that are impacting housing markets across the country.
“The latest numbers show that investors still face an uphill climb to clear significant profits after expenses,” Attom CEO Rob Barber said in a statement. “They, like others, also face tenuous times amid a housing market boom that’s cooled down over the past year. But we now have a year’s worth of a trend showing that things have started to turn around for the flipping industry, with clear signs of increasing interest flowing into the market.”
Geographically speaking, home-flip rates are up in 77.5% of U.S. metro areas. In areas with declines, most experienced a drop of less than 2 percentage points.
Among markets with a population of at least 200,000, the highest rates of flips were recorded in Warner Robins, Georgia; Macon, Georgia; Fayetteville, North Carolina; Atlanta; and Memphis, Tennessee. The share of sales that were flips in these markets were 14% or more.
Conversely, the smallest shares of flips — each at about 5% — among the 173 metro analyzed were in Honolulu; Oxnard, California; Naples, Florida; Des Moines, Iowa; and Seattle.
The percentage of flips paid for with cash remained steady at 63.8%.
