Home Flipping Declines Again as Investor Profits Hit 13-Year LowBy RISMedia Staff
92,422 single-family houses and condominiums were flipped in Q3 2022, which is 7.5% of all home sales (or one in 13 transactions), according to a new report from ATTOM.
ATTOM’s Home Flipping Report for Q3 2022 found that the latest portion was down from 8.2%, or one in every 12 home sales in the nation during last quarter. But it was still up from 5.9%, or one in 17 sales, last year. Despite the decline, the home-flipping rate during Q3 2022 still stood at the third-highest level in the past decade, below the high point of 9.7% registered in Q1 2022. Among all flips nationwide, ATTOM found that the gross profit on typical transactions (the difference between the median purchase price paid by investors and the median resale price) decreased to $62,000. That was down 18.4% from $76,000 last quarter and down 11.4% from $70,000 last year. The latest profit figure stood at the lowest point since Q4 2019, while the quarterly rate of decline marked the worst since early 2009. Typical profit margins, as the report stated, sank after rising in the prior two quarters. The typical gross-flipping profit of $62,000 translated into a 25% return on investment compared to the original acquisition price. That was down from 30.2% last quarter and from 31.8% last year. The typical third-quarter return on investment slumped to the lowest point since 2009 and was less than half the peak over the past decade of 53.1% in late 2016. ATTOM stated that so large was the fall in Q3 that typical returns were less than 25% in nearly half the metropolitan areas around the nation with enough data to analyze, compared to just a third of them earlier in 2022. Specifically the typical resale price on flipped homes declined to $310,000. That was down 5.5% from $328,000 last quarter, although still up 6.9% from $290,000 last year. The report found that the quarterly drop-off in median resale values was worse than the 1.6% decline in prices that recent home flippers were commonly seeing when they originally bought their properties. The price-change gap between buying and selling resulted in profit margins going down from Q2 to Q3 2022. Key highlights:
“This is a classic good news/bad news report for fix-and-flip investors,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While flipping activity in the third quarter was among the highest on record, gross profits and profit margins declined significantly, reflecting the overall pricing weakness in today’s housing market.” Sharga added, “It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market. With demand from buyers weakening, prices trending down over the past few months, and financing rates significantly higher than they were at the beginning of the year, flippers face a much more difficult environment today, and probably will in 2023 as well.” For the full report, with more information on investing, flip times and rates, click here. |
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