Fewer homes were resold in the second quarter of 2024 than in the first three months, but profit margins improved for the fourth time in five quarters after six years of near-constant stagnation. But the market remains challenging.
A total of 79,540 single-family homes and condominiums were resold in the second quarter, or 7.5%, or 1 in 13 home sales, according to ATTOM's new report. That's lower than 8.7% in the first quarter and 7.9% a year ago. But ATTOM explains that this is a typical pattern in the spring, when sales of other types of homes increase.
Nationwide, the typical investor made a 30.4 percent profit before expenses on a property flip, “a range that can easily be wiped out after expenses like renovations, mortgage payments and property taxes, signaling new struggles for home flippers to make healthy profits,” the report said. Still, investment returns were slightly higher than in the first quarter.
Investors paid a median purchase price of $241,508, resulting in a gross profit of $73,500 (30.4%) against a median resale price of $315,000. This is higher than the $70,000 in Q1 2024 and higher than the 2023 low of $12,000, but far lower than the 48.8% profit in 2020. Half of the metro areas surveyed saw profit margins increase between the first and second quarters, and on an annualized basis, they increased by 58%. However, in only one-third of the areas analyzed did profit margins exceed 50%.
The cities with the largest gains were Akron, Cape Coral-Fort Myers, Springfield, Illinois, Gainesville, Florida and Spokane. Among cities with populations over one million, the largest gains were Buffalo, Cleveland, Memphis, Tulsa and Cincinnati. The West, South and Northeast regions, with existing home prices over $400,000, produced the largest net gains on median-priced home resales in the second quarter. The lowest net gains were in the South, where existing home prices were below $300,000. Three Texas cities were included in this group: Tyler, Lubbock, Killeen, Naples and Warner Robins.
“Profits are not surging and investors are riding a new wave of economic upswing. Instead, they continue to struggle to profit from the overall market upturn. But the second-quarter numbers represented another step in the right direction,” Atom CEO Rob Barber said, predicting improvement could occur in the second half of the year “as long as prices do not rise beyond what most buyers can pay.”
While home prices increased significantly during the quarter, the average selling price for home resales increased only 2% quarterly and annually to $315,000. “Investors took a small cut from favorable price movements between the time of purchase and the time of resale. This gap translated into higher quarterly and annual investment returns.”
“Home flippers' recent gains represent an extended recovery from an unusual pattern of mistiming the housing market, which resulted in their profits declining from 2016 through 2022 while other sellers' profits soared,” the report said.
Home resales as a percentage of total home sales reportedly decreased in 86% of large U.S. cities between the first and second quarters. The largest number of resales occurred in Southern cities, including four cities in Georgia: Warner Robins (20%), Macon (15.4%), Atlanta (13.4%), and Columbus (13.2%). Additionally, Memphis saw 12.8% of sales being resales. Birmingham and Cleveland also saw high rates of resales.
When buying a home with the intent to resell, cash was the predominant payment in 63 percent of cases. The average time from purchase to resale increased from 164 days in the first quarter to 166 days in the second quarter. Of the homes that were resold, FHA-backed buyers accounted for 11 percent.