According to the most recent numbers from Attom Data Solutions, trendlines related to home flipping continue to diverge, with flipping activity remaining on the rise but profit margins still sinking.
Per the company’s year-end 2022 U.S. home flipping report, 407,417 single-family homes and condominiums were flipped nationwide last year. That’s up 14% year over year and up 58% from 2020 to reach the highest number of flips since at least 2005. Home flips comprised 8.4% of all home sales, also the highest since 2005. For comparison, flips represented 5.9% of home sales in 2021 and 5.8% in 2020.
But there’s less money in it for investors than there used to be. Home flips in 2022 sold for a median price of $320,000 nationwide, compared to a median original purchase price of $252,100. That’s a gross profit of $67,900, down 3% annually, and equates to only a 26.9% return on investment (ROI) compared to the investor’s original acquisition price.
It’s the smallest return since at least 2008 and it’s the second major decline in profit margins for flips in two years. Consider that the home flip ROI was 41.9% in 2020 and 32.6% in 2021. The median nationwide resale price on flipped homes grew by 12.3% last year, but the median price investors paid when they originally bought the homes they flipped rose 17.3%.
In fact, with the median value of home flips rising more slowly than investors’ median purchase price, flippers saw their profit margins fall for the fifth time in the past six years. Returns on home flips have been steadily on the wane since 2017, exacerbated most recently as affordability has stalled homebuyer demand and home prices have declined.
“Last year, home flippers throughout the U.S. experienced another tough period as returns took yet another hit,” Attom Data CEO Rob Barber said. “For the second straight year, more investors were flipping but found no simple path to quick profits.
“Indeed, returns are now at the point where they could easily be wiped out by the carrying costs during the renovation and repair process, which usually accounts for 20% to 33% of the resale price. This year will reveal more about whether investors decide to find different ways to profit from home flipping or take a step back and wait for conditions to get better.”
