Downward angle icon An icon in the shape of a downward angle. A home is listed for sale in Arlington, Virginia, on July 13, 2023. Saul Loeb/AFP/Getty Images According to ATTOM, margins and profits on home flipping reached their highest levels since mid-2022. Rising home prices this year have helped boost values of resold properties. “The resurgence of the home flipping industry looks like a real trend, not just a temporary hiatus after a pretty dark few years.”
Home resale activity fell again in the third quarter, but profit margins reached their highest level since mid-2022, ATTOM said.
Home flippers' profits have risen for three straight quarters this year as home prices have moved in their favor, boosting the value of properties that investors renovate between buying and selling.
This resulted in gross profit of $70,000, up from $66,500 in the second quarter, and while still well short of the all-time high of $102,063 for 2022, it signals a steady recovery in the investment sector.
Similarly, profit margins rose to 29.8% from 29% in the second quarter and a recent low of 22.4% in the fourth quarter of last year. This comes after margins were cut by nearly two-thirds between the start of 2021 and 2022.
“The resurgence of the home flipping industry appears to be a real trend, not a brief pause amid a rather gloomy past few years,” Atom CEO Rob Barber said in the report. “Indeed, investment returns are still nowhere near the levels of a few years ago, and the latest national profit margins are just barely within the range to cover typical holding costs for flipping, although there is wide variation across the country.”
The improvement has not translated into an increase in the home resale rate, which fell from 7.9% to 7.2% between the second and third quarters and is now at its lowest level in two years.
Home flippers are likely facing the same problems plaguing the rest of the housing market, including a lack of inventory and rising mortgage rates. Indeed, all-cash transactions among these investors increased slightly throughout the third quarter as 30-year fixed mortgage rates approached 8%.
Still, home flippers seem optimistic about 2024. A new report from New Western found that 53% of real estate investors expect their business to grow by at least 25% next year.