Investors are reselling homes at the slowest pace in 15 years, with investment returns from resales falling to the lowest since 2007. Two-thirds of resold homes are still purchased with cash.
IRVINE, CA – March 21, 2024 – ATTOM, a leading curator of land, real estate and property data, today released its Year-End 2023 U.S. Home Resales Report, which found that 308,922 single-family homes and condominiums were resold in the U.S. in 2023. This represents a 29.3% decrease from 436,807 in 2022 and the largest annual decline since 2008.
The report also found that as the number of homes resold by investors declined, resales as a percentage of total home sales also fell from 8.6% in 2022 to 8.1% last year.
In another sign of the home-resale industry's downturn, profits and margins on quick-buy, quick-renovate and quick-resale projects also fell.
Nationwide, gross profit on a typical home flip has fallen to $66,000 in 2023 (the difference between the median sales price and the median amount investors originally paid). That's down from $70,100 in 2022, representing just a 27.5% return on investment compared to the original acquisition price. The latest national ROI (before considering mortgage interest, property taxes, renovation costs and other holding costs) is down from 28.1% in 2022 and 35.7% in 2021, the worst since 2007.
Investor returns fell for the sixth time in the past seven years as the median price of resold homes fell slightly faster than the median price paid to buy a property, 4 percent.
“2023 is an increasingly challenging environment for home flipping across the U.S.,” said Rob Barber, CEO of ATTOM. “Whether the overall market has soared in recent years or only seen modest gains, investors have missed out.”
“The sharp decline in home resale activity is likely the result of a combination of a lack of supply of properties for sale and declining revenues,” he added. “Either way, a major financial overhaul will be needed to turn around the fortunes of home resale.”
The recent drop in home flipping profits came in the same year that the nation's decade-long rise in home prices began to stall, leading to the lowest annual price growth since 2012 and slightly lower profits for all sellers. But home flipper margins had already been falling in previous years, when the overall housing market was booming. As that happened, the profit gap between investors and all sellers gradually widened.
Typical profits in 2023 were easily offset by maintenance costs during the renovation and repair process, which typically account for 20-33% of the resale price.
Home resale rates fell in most housing markets, with the biggest declines in the South and West
Of the 212 metropolitan statistical areas analyzed in the report, 112 cities saw a decrease in home resales as a percentage of total home sales from 2022 to 2023 (53%). The top 25 cities with the largest annual resale rate declines were all in the South and West. These were led by Gainesville, GA (down from 15.1% in 2022 to 9.9% in 2023), Phoenix, AZ (down from 16.3% to 11.9%), Prescott, AZ (down from 9.8% to 6%), Charlotte, NC (down from 14.2% to 10.6%) and Provo, UT (down from 10.9% to 7.5%).
Outside of Phoenix and Charlotte, the metropolitan areas with populations of 1 million or more that will see the largest declines in resale rates from 2022 to 2023 are Las Vegas, Nevada (down from 12.2% to 8.9%), Sacramento, California (down from 9.9% to 6.9%) and Tucson, Arizona (down from 14.6% to 11.8%).
Top metro areas seeing increases in home resale rates from 2022 to 2023 include Macon, GA (up 17% from 12.1%), Gulfport, MS (up 7.7% from 3.9%), Jackson, MS (up 8.4% from 5.8%), Columbus, GA (up 13.5% from 10.9%) and Dayton, OH (up 12.4% from 10%).
Resale of homes purchased with financing is on the rise
Nationwide, the share of resale homes originally purchased with financing by investors increased to 36.5% in 2023, up from 35.7% in 2022 and 36.2% in 2021.
US Home Resale Financing Trends
Meanwhile, 63.5% of homes resold in 2023 were originally purchased with cash only, down from 64.3% in 2022 and 63.8% two years prior.
Among metro areas with a population of 1 million or more and sufficient data to analyze, the cities with the highest percentage of resale homes purchased by investors with financing in 2023 were San Diego, California (56.4%), Seattle, Washington (56.1%), Fresno, California (52.2%), Providence, Rhode Island (49.2%), and Boston, Massachusetts (48.6%).
Among that same group, the metro areas with the highest percentage of resale properties purchased all with cash were Detroit, Michigan (81.6%), Cleveland, Ohio (76.3%), Buffalo, New York (75.5%), Pittsburgh, Pennsylvania (71.1%) and Birmingham, Alabama (70.2%).
Typical gross profits from home resales are down in nearly two-thirds of the country.
Homes resold in 2023 sold for an average of $306,000 nationwide, generating a resale gross profit of $66,000 above the median original purchase price of $240,000 paid by investors. This national gross profit figure was down from $70,100 in 2022 and $75,000 in 2021, which was the highest this century.
US Home Resale Gross Profit
Among the 56 U.S. metro areas with populations of over 1 million, the largest gross resale gains on median-priced transactions in 2023 were San Jose, CA ($275,250), San Francisco, CA ($170,000), Boston, MA ($158,000), New York, NY ($154,750) and San Diego, CA ($153,000).
The metropolitan areas with populations over 1 million that had the lowest real estate resale gross profits in 2023 were Austin, TX (loss of $18,640), San Antonio, TX (profit of $12,289), Dallas, TX (profit of $14,817), Houston, TX (profit of $16,932) and Phoenix, AZ (profit of $25,000).
Home resale profits are down in two-thirds of metro markets
Last year, the profit margin on a typical home flip in the U.S. fell to 27.5%, the lowest investment return since 2007. The ROI on a nationally average-priced home flip has fallen 18 percentage points since 2020 and 27 percentage points since 2016.
Margins fell again last year as the national average resale price for resale homes fell 4.4% from $320,000 in 2022 to $306,000 in 2023. That was a slightly larger drop than the 4% drop in prices investors originally paid for properties they resold ($249,900 in 2022 vs. $240,000 in 2023).
Among metro areas with a population of over 1 million, the largest declines in profitability in 2023 are Pittsburgh, Pennsylvania (ROI falling from 149.8% in 2022 to 105.3% in 2023), Buffalo, New York (125.2% to 87.4%), Oklahoma City, Oklahoma (57.6% to 43.7%), Richmond, Virginia (88.3% to 75.1%) and Austin, Texas (from a 9% gain to a 4.1% loss).
Within the same group of markets with populations over 1 million, the biggest increases in return on investment from a typical home flip are in Cincinnati, Ohio (ROI increases from 40.5% in 2022 to 59.6% in 2023), Cleveland, Ohio (up from 39.5% to 54.7% in 2023), Honolulu, Hawaii (up from 15.3% to 27%), Sacramento, California (up from 9.5% to 19.6%) and Hartford, Connecticut (up from 48.5% to 56.4%).
Among metropolitan areas with populations of 1 million or more, the highest gross profit margins in 2023 were Pittsburgh, PA (105.3%), Buffalo, NY (87.4%), Baltimore, MD (75.5%), Richmond, VA (75.1%) and Philadelphia, PA (74.3%). The lowest gross profit margins were in Austin, TX (4.1% loss), Dallas, TX (4.4% gain), San Antonio, TX (5% gain), Salt Lake City, UT (6.2% gain) and Houston, TX (6.2% gain).
Average resale time increases nationwide
Home flippers who sold homes in 2023 took an average of 169 days, or about five and a half months, to complete the resale, up from 165 days for homes flipped in 2022 and 158 days in 2021.
Average days to resell in the US
FHA buyers buy the majority of resale homes
Of the 308,922 homes resold in the U.S. in 2023, 10.8%, or 1 in 9, were sold to buyers using loans insured by the Federal Housing Administration (FHA). This is up from 8.3%, or 1 in 12, in 2022 and 8.1% in 2021.
Of the 212 metro areas with populations of over 200,000 and more than 100 home resales scheduled in 2023, the cities with the highest percentage of homes resold to FHA buyers (typically first-time homebuyers) in 2023 were Merced, CA (29.3%), Modesto, CA (25%), Visalia, CA (24.7%), Bakersfield, CA (24.6%) and Kennewick, WA (23.7%).
In 2023, about 200 counties had home resale rates of at least 10%.
Of the 866 counties with at least 50 home resales in 2023, 204 counties had resales account for at least 10% of all home sales last year. The top five were all in Georgia: Cobb County (Marietta) (22.4%), Bibb County (Macon) (18.6%), Douglas County (suburban Atlanta) (18.4%), Houston County (Warner Robins) (18%) and Clayton County (suburban Atlanta) (17.2%).
Key takeaways from the Q4 2023 data:
65,656 home resales were completed by 52,701 investors in the fourth quarter of 2023, resulting in a ratio of 1.25 resales per investor. The percentage of homes resold in the fourth quarter of 2023 that were purchased with financing by investors represented 36.1% of all homes resold in the quarter, down from 37.2% in the previous quarter but up from 34.4% in the fourth quarter of 2022. The percentage purchased with cash rose to 63.9%, up from 62.8% in the third quarter of 2023 but down from 65.6% in the fourth quarter of 2022. Gross profits on the median priced home resale in the fourth quarter of 2023 were $65,000, down from $68,154 in the third quarter but up from $59,900 in the fourth quarter of 2022. The latest figures represent a typical return on investment (as a percentage of the original purchase price) of 27.7%, down from 28.8% in the previous quarter but up from 24.4% for the same period in 2022. The quarterly decrease in ROI, common at this time of year each year, followed increases in the second and third quarters of 2023. Home resales completed in the fourth quarter of 2023 took an average of 156 days, down from 165 days in the fourth quarter of 2022.
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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 another 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 are typically 20-33 percent of the property's renovated price). Gross profit was calculated by dividing gross profit by the original sale (purchase) price.
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