Resale rates declined for the second consecutive quarter, while profit margins increased again. Investment income continued to recover after two years of declines, and resale profits rose to their highest level since mid-2022.
IRVINE, CA – December 14, 2023 – ATTOM, a leading curator of land, real estate and property data, today released its U.S. Home Resales Report for Q3 2023. According to the report, 72,543 single-family homes and condominiums were resold in the U.S. during the third quarter. These transactions represent 7.2% of all home sales in the July-September 2023 months, or 1 in 14 home sales nationwide.
Watch: ATTOM Q3 2023 U.S. Home Resale Report
This latest percentage is down from 7.9% of all U.S. home sales in the second quarter of 2023 and 7.7% in the third quarter of last year. While the resale rate remains historically high, it marked a second consecutive quarter of decline and the lowest level in two years.
But despite the drop in resale rates, the latest analysis also found that home flippers' fortunes continued to improve in the third quarter in the form of rising profits. Investor returns rose for the third consecutive quarter, bouncing back from a slump that saw profit margins fall by nearly two-thirds from early 2021 to late 2022. Profit margins, along with net income, rose to their highest levels since the middle of last year.
The typical profit margin for home resales nationwide in the third quarter, based on the difference between the average purchase price and the average resale price, was 29.8%, remaining well below the peak in 2021. But it was up from 29% in the second quarter of 2023 and up 7 percentage points from a low of 22.4% in the fourth quarter of last year.
Meanwhile, net profits from a typical property flip nationwide rose to $70,000, still well down from the high of $110,000 recorded in 2021, but up slightly from the second quarter of 2023 and $15,000 higher than last year's low.
“The resurgence of the home flipping industry appears to be a real trend, not a brief respite from a rather gloomy past few years,” says Rob Barber, CEO of ATTOM. “Indeed, investment returns are still nowhere near where they were a few years ago, and the latest national profit margins are barely within the spread that would cover typical holding costs for flipping, with wide variation across the country. Nevertheless, home flippers continue to move back in the right direction.”
Profits and margins started to rise again in the third quarter of 2023 as investors were able to benefit from favorable price movements between the time they purchased a property and the time they sold it.
Specifically, the typical resale price of a flipped home fell to $305,000 in the third quarter, down 1.5% from the second quarter of 2023. However, the drop was not as large as the 2.1% drop in median price that home flippers have typically seen in recent times when purchasing properties. The smaller quarterly decline in resale prices has led to improved profits and profit margins.
Home resale rates fall in three-quarters of the country
From Q2 to Q3 2023, 136 of 183 U.S. metropolitan statistical areas (74%) with sufficient data for analysis experienced a decline in home resales as a percentage of total home sales. Most of the declines were by less than 2 percentage points. (Metropolitan areas with populations of 200,000 or more and with 50 or more home resales in Q3 2023 were included.)
Among these metro areas, the highest resale rates in the third quarter of 2023 were in Macon, Georgia (where resales accounted for 16.1% of all home sales), Salisbury, Maryland (14.1%), Spartanburg, South Carolina (13.3%), Atlanta, Georgia (13.2%) and Fayetteville, North Carolina (12.8%).
Outside of Atlanta, the cities with the highest resale rates among metropolitan areas with populations of over 1 million were Memphis, Tennessee (12.5%), Jacksonville, Florida (10.8%), Phoenix, Arizona (10.4%) and Cincinnati, Ohio (10.2%).
The metro areas with the lowest home resale rates in the third quarter analyzed were Seattle, Washington (3.8%), Madison, Wisconsin (3.9%), Honolulu, Hawaii (3.9%), Bridgeport, Connecticut (4%) and Lansing, Michigan (4.1%).
By region, the highest resale rate in the third quarter was in the South (9.1%), followed by the West (8.1%), Midwest (6.5%) and Northeast (5.2%).
A typical home flip is profitable in half of U.S.
The average resale price of homes resold nationwide in Q3 2023 was $305,000, generating gross profits of $70,000 above the median investor purchase price of $235,000. As a result, profit margins were typically 29.8% in Q3 2023, up from 29% in Q2 this year and 27% in Q3 last year (and a recent low of 22.4% in Q4 2022). However, the latest national figures are still well below the 60.8% level recorded in Q2 2021.
Of the 183 metro areas analyzed, 93 (51%) saw profit margins increase from the second quarter to the third quarter, and of those, 111 (61%) saw profit margins increase compared to the previous year.
The cities with the largest year-over-year increases in third-quarter typical profit margins were Akron, Ohio (ROI increased from 50% in Q3 2022 to 114.1% in Q3 2023), Flint, Michigan (up 61.6% to 113.8%), Canton, Ohio (up 17.8% to 69.6%), Augusta, Georgia (up 44.8% to 93.5%) and York, Pennsylvania (up 61.5% to 107.5%).
Among metro areas with populations of 1 million or more, the highest annual increases in typical return were in Birmingham, Alabama (ROI increasing from 35.4% in Q3 2022 to 71.9% in Q3 2023), Buffalo, NY (up from 75.6% to 109.7%), Cleveland, OH (up from 35.8% to 67%), Cincinnati, OH (up from 33.5% to 55.3%) and Tulsa, Oklahoma (up from 32.3% to 53.8%).
The recent gains have resulted in typical returns below 30% in just 68 of the 183 cities, or about one-third, with enough data to analyze for the third quarter of 2023. That's a lot better than a year ago, when investment returns were generally that low in half of those metros.
The metro areas with populations of 1 million or more with the lowest typical home resale returns in Q3 2023 were Austin, TX (1.2%), Dallas, TX (4.9%), San Antonio, TX (5.7%), Houston, TX (8.1%) and Salt Lake City, UT (11.2%).
Investors see highest net gains in the West and Northeast
The highest net profits (in dollar terms) from median priced home resales in Q3 2023 were concentrated in the Western and Northeastern regions of the country. Twenty of the top 25 were in these regions, led by San Jose, CA (typical gross profit of $355,000), San Francisco, CA ($249,000), Salisbury, MD ($231,015), San Diego, CA ($189,000), Bridgeport, CT and New York, NY ($165,000).
The South, along with the West, occupied the other end of the range. These two regions accounted for 24 of the 25 regions with the lowest gross profits on median-priced transactions in the third quarter. The lowest were Albuquerque, NM (loss of $1,875), Tyler, TX (profit of $1,749), Provo, UT (profit of $2,120), Austin, TX (profit of $4,939) and Beaumont, TX (profit of $6,062).
Slight increase in lump-sum cash investments by home flippers
Nationwide, 62.9% of homes resold in Q3 2023 were purchased by investors with cash, up from 62.3% in Q2 2023 but down from 63.7% in Q3 2022. Meanwhile, 37.1% of homes resold in Q3 2023 were purchased with financing, down from 37.7% in the previous quarter but up from 36.3% a year ago.
“After declining slightly at the start of 2023, national mortgage rates increased by one percentage point in the third quarter, which led to a slight increase in all-cash resales,” Barber noted. “With interest rates falling again, the pressure to finance resales with cash is easing a bit. This could encourage more investors to finance their purchases in the same way they did a few years ago when interest rates were very low.”
Among metro areas with a population of 1 million or more and sufficient data for analysis, the cities with the highest percentage of homes purchased for cash and resold in the third quarter of 2023 were Detroit, Michigan (79.7%), Cleveland, Ohio (76.5%), Rochester, New York (73.4%), Cincinnati, Ohio (72.6%) and Buffalo, New York (70.4%).
The national average number of days to resell decreased by 17 days
The average time from purchase to resale for home resales decreased to 161 days in the third quarter of 2023. This is down from 178 days in the second quarter of 2023 and 165 days in the third quarter of 2022, and is the lowest level since the fourth quarter of 2021.
Investor resales to FHA buyers fall for the first time in more than a year
Of the 72,543 homes resold in the U.S. in the third quarter of 2023, 10.1% were sold to buyers using loans insured by the Federal Housing Administration (FHA), the first quarterly decline since the second quarter of last year. The latest percentage is down from 11.8% in the second quarter of 2023 but still up from 8.9% in the third quarter of 2022.
Among metro areas with populations of 200,000 or more and 50 or more home resales in the third quarter of 2023, the cities with the highest percentage of properties resold to FHA buyers (usually first-time homebuyers) were Bakersfield, CA (27.7%), Visalia, CA (27.4%), Greeley, CO (27.3%), Vallejo, CA (26.7%) and Lakeland, FL (24.9%).
One in six counties has a home resale rate of at least 10 percent.
Of the 979 counties nationwide with 10 or more home resales in the third quarter of 2023, 175 (17.9%) had home resales account for 10% or more of total home sales. This was down from 23.9% of all counties with sufficient measurable data in the second quarter of 2023. The top counties for home resales in the third quarter of this year were Somerset County (Princess Anne), Maryland (22%), Lumpkin County (north of Atlanta), Georgia (20.4%), Lamar County (south of Atlanta), Georgia (20%), Cobb County (Marietta), Georgia (20%), and Hopewell City/County, Virginia (19.4%).
How to Report
ATTOM analyzed bill of sale data for this report. A resale of a single-family home or condominium is an arm's length transaction that took place in the same quarter as an arm's length transaction for the same property within the past 12 months. Average gross profit is the difference between the purchase price and the resale price (not including repairs and other expenses, which resale veterans estimate typically range from 20 to 33 percent of the property's renovated price). Gross profit was calculated by dividing gross profit by the original purchase price.
About ATTOM
ATTOM delivers premium property data to power products that improve transparency, innovation, efficiency, and disruption in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for over 155 million residential and commercial properties covering 99% of the U.S. population. A rigorous data management process involving over 20 steps validates, standardizes, and enriches real estate data collected by ATTOM, and assigns a permanent unique ID (ATTOM ID) to each property record. The 30 TB ATTOM data warehouse drives innovation across many industries, including mortgage, real estate, insurance, marketing, and government, through flexible data delivery solutions including bulk file licensing, property data APIs, real estate market trends, property navigator, and more. We also introduce ATTOM Cloud, our latest innovative solution that provides instant access and streamlines data management.
Media Contact:
Kristin Stricker
949.748.8428
christine.stricker@attomdata.com
Data and Reporting License:
949.502.8313
datareports@attomdata.com