Home Flipping Activity, Profits Rise in Q1

NEW YORK – ATTOM has released its first-quarter 2024 U.S. Home Flipping Report showing that 67,817 single-family homes and condominiums in the United States were flipped in the first quarter. Those transactions represented 8.7%, or one of every 12 home sales nationwide, during the months running from January through March of 2024.

The latest portion was up from 7.7% of all home sales in the U.S. during the fourth quarter of 2023, the second straight quarterly gain; however, it was still down from 9.8% in the first quarter of last year.

As flipping rates went up, fortunes kept improving for investors who buy and quickly resell homes. The latest data showed that home flippers typically earned a 30.2% gross profit nationwide before expenses on homes sold during the first quarter of this year, marking the third time in four quarters that margins increased following a six-year period of mostly uninterrupted declines.

The typical first-quarter profit margin – based on the difference between the median purchase and median resale price for home flips – remained about 25 percentage points below peaks hit in 2016. It also stayed within a range that could easily be wiped out by carrying costs that include renovation expenses, mortgage payments and property taxes.

But it was up from both the fourth quarter of 2023 and from a low point over the past decade of about 25% in the first quarter of last year.

Gross profits on typical flips around the country, meanwhile, increased to $72,375. That remained down from a high of about $80,000 reached in 2022. But it was up from $65,000 in the fourth quarter of 2023 and was about $10,000 above last year’s low point.

“The latest numbers show that investors still face an uphill climb to clear significant profits after expenses,” said Rob Barber, CEO for ATTOM. They, like others, also face tenuous times amid a housing market boom that’s cooled down over the past year. But we now have a year’s worth of a trend showing that things have started to turn around for the flipping industry, with clear signs of increasing interest flowing into the market.”

The continued improvements in profits and profit margins over the past year reflect a rejuvenated pattern of investors benefitting from shifts in prices going in their favor between the time of purchase to resale.

In the first quarter of 2024, the typical nationwide resale price on flipped homes increased to $312,375, a 4.1% improvement over the fourth quarter of 2023. The increase outpaced the 2.1% rise in median prices that recent home flippers were commonly seeing when they were buying their properties. Similar gaps appeared annually as well, leading to the quarterly and yearly improvement in investment returns.

Home flipping rates turn upward in almost 80% of nation

Home flips as a portion of all home sales increased from the fourth quarter of 2023 to the first quarter of 2024 in 134 of the 173 metropolitan statistical areas around the U.S. with enough data to analyze (77.5%). Most of the declines were by less than two percentage points. (Metro areas were included if they had a population of 200,000 or more and at least 50 home flips in the first quarter of 2024 and sufficient data.)

Among those metros, the largest flipping rates during the first quarter of 2024 were in Warner Robins, GA (flips comprised 18.7% of all home sales); Macon, GA (17.1%); Fayetteville, NC (15.8%); Atlanta, GA (14.7%) and Memphis, TN (14.6%).

Aside from Atlanta and Memphis, the highest flipping rates among metro areas with a population of more than 1 million were in Columbus, OH (12.8%); Birmingham, AL (12.7%) and Kansas City, MO (12.1%).

The smallest home-flipping rates among metro areas analyzed in the first quarter were in Honolulu, HI (3.7%); Oxnard, CA (5.3%); Naples, FL (5.4%); Des Moines, IA (5.5%) and Seattle, WA (5.5%).

Typical home flipping returns rise in slightly more than half of U.S.

The median $312,375 resale price of homes flipped nationwide in the first quarter of 2024 generated a gross profit of $72,375 above the median investor purchase price of $240,000. That resulted in a typical 30.2% profit margin in the first quarter of 2024, up from 27.7% in the fourth quarter of 2023 and 25.3% in the first quarter of last year. But the latest nationwide figure still remained far beneath the 56.3% level in mid-2016 and from a more recent peak of 48.8 in 2020.

Profit margins went up from the fourth quarter of last year to the first quarter of this year in 89 of the 173 metro areas analyzed (51.4%) and were up annually in 111 of those markets, or 64.2%.

The biggest year-over-year increases in the typical profit margins during the first quarter came in Reading, PA (ROI up from 56.7% in the first quarter of 2023 to 124.9%in the first quarter of 2024); Trenton, NJ (up from 22.7% to 64.% ); Harrisburg, PA (up from 73.6% to 113.6%); Lynchburg, VA (up from 49% to 87.5%) and Columbus, GA (up from 41.8% to 80.1%).

Markets with the largest returns on investment for typical home flips completed during the first quarter of 2024 were concentrated in lower-priced areas of the Northeast, led by Buffalo, NY (127.8% return); Reading, PA (124.9%); Pittsburgh, PA (120.6%); Scranton, PA (115.7%) and Harrisburg, PA (113.6%).

Metro areas with a population of at least 1 million and the weakest returns on typical home flips in the first quarter of 2024 were Austin, TX (0.3%); Honolulu, HI (1.7%); San Antonio, TX (2%); Dallas, TX (5.3%) and Houston, TX (8.4%)

Investors earn highest raw profits in more expensive areas of West, South and Northeast

The largest raw profits on median-priced home flips in the first quarter of 2024, measured in dollars, were concentrated in areas of the West, South and Northeast regions where resale prices mostly topped $400,000. Fifteen of the top 20 fell into that category, led by San Jose, CA (typical gross profit of $297,500 on a median resale value of $1.6 million); San Francisco, CA ($280,000 profit on a median resale value of $1.1 million); San Diego, CA ($190,750 profit on a median resale value of $926,500); Bridgeport, CT, ($175,000 profit on a median resale value of $500,000 million) and Oxnard, CA ($162,000 profit on a median resale value of $929,500).

The South also dominated the opposite end of the range, with 16 of the 20 worst raw profits on median-priced transactions during the first quarter, although resale price ranges were mixed. The weakest numbers were in Jackson, MS ($3,873 loss on a median resale value of $185,560); Killeen, TX ($1,209 loss on a median resale value of $208,750); Austin, TX ($1,178 profit on a median resale value of $427,725); San Antonio, TX ($5,144 profit on a median resale value of $258,259) and Honolulu HI ($10,092 profit on a median resale value of $597,567).

All-cash investing by home flippers holds steady

Nationwide, 63.8% of homes flipped in the first quarter of 2024 had been purchased by investors with cash. That was virtually the same as the 63.7% level in the fourth quarter of 2023, although still down from 65.4% portion in the first quarter of 2023. Meanwhile, 36.2% of homes flipped in the first quarter of 2024 had been bought with financing. That was down slightly from 36.3% in the prior quarter, but still up from 34.6% a year earlier.

Among metropolitan areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of homes flipped in the first quarter of 2024 that had been purchased with cash were in Buffalo, NY (82.2% ); Detroit, MI (77.3% ); Cleveland, OH (74.8%); Birmingham, AL (73.1%) and Pittsburgh, PA (73%).

Average time to flip nationwide rises but remains down from a year ago

The average time it took from purchase to resale on home flips increased to 164 days in the first quarter of 2024. That was up from 156 in the fourth quarter of 2023, but still down from 178 days in the first quarter of 2023.

Investor resales to FHA buyers increase

Of the 67,817 U.S. homes flipped in the first quarter of 2024, 11.2% were sold to buyers using loans backed by the Federal Housing Administration (FHA), marking the second straight quarterly increase. The latest portion was up from 10.4% in the fourth quarter of 2023 and from 10.7% in the first quarter of 2023.

Among metro areas with a population of 200,000 or more and at least 50 home flips in the first quarter of 2024, those with the highest percentages of flipped properties sold to FHA buyers typically first-time home purchasers were in Scranton, PA (27.1%); Bakersfield, CA (26.8%); Visalia, CA (26.8%); Yuma, AZ (25.9%) and Flint, MI (25.8%).

One-third of counties have home-flipping rates of at least 10%

Home flips accounted for at least 10% of all home sales in 284, or 31.5%, of the 902 counties around the U.S. with at least 10 flips in the first quarter of 2024. That was well above the 22.7% of all counties with enough data to measure in the fourth quarter of 2023. The leaders in the first quarter of this year were Cobb County (Marietta), GA (23.5%); Hickman County, TN (outside Nashville) (20.3%); Houston County (Warner Robins), GA (20.1%); Clayton County, GA (outside Atlanta) (19.6%) and Douglas County, GA (outside Atlanta) (19.5%).

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