Home Flipping Activity Dips But Profits Improve in Q2

Fewer homes have been flipped for 2Q 2024 than in the first three months but profit margins improved for the fourth time in five quarters, following six years of nearly continuous downturns. The market, however, remains tricky.

In total, 79,540 single-family homes and condominiums were flipped in the second quarter, accounting for 7.5% or one of every thirteen home sales, according to a new ATTOM report. That was lower than the 8.7% rate in the first quarter as well as the 7.9% rate a year earlier. However, ATTOM described this as a common pattern in Spring when home sales of other types rise.

Nationwide, the profit before expenses earned by the typical investor on flips was 30.4% — “a range that could easily be wiped out by carrying costs that include renovation expenses, mortgage payments and property taxes, revealing new struggles home flippers are having in turning healthy profits,” the report noted. Still, the return on investment was slightly higher than in the first quarter.

The median investor purchase price of $241,508 resulted in a gross profit of $73,500 – 30.4% — on the median $315,000 resale price of flipped homes. That was higher than the $70,000 in 1Q 2024, and more than the $12,000 at the low point in 2023, though well beneath the equivalent 48.8% profit in 2020. Profit margins increased between the first and second quarters in half the metro areas studied and rose on an annual basis by 58%. However, they exceeded 50% in only one-third of the areas analyzed.

The biggest gains were in Akron, Cape Coral-Fort Myers, Springfield, IL, Gainesville, FL and Spokane. The cities with over one million people that benefited most were Buffalo, Cleveland, Memphis, Tulsa, and Cincinnati. Areas of the West, South and Northeast where resale prices topped $400,000 produced the largest raw profits on median-priced home flips in the second quarter. Many of the lowest raw profits were recorded in the South, with median resale prices below $300,000. Three Texas cities – Tyler, Lubbock, and Killeen – were in that group, along with Naples and Warner Robins.

“It’s not as if profits have shot through the roof and investors are riding a new wave of good times. Far from it, as they continue to struggle to benefit from the broader market boom. But the second-quarter numbers did show another step in the right direction,” said ATTOM CEO Rob Barber, predicting they could improve later in the year “as long as prices don’t shoot up past what most buyers can afford.”

While home prices rose strongly in the quarter, the median home-flipping sale price was up just 2% quarterly and annually to $315,000. “Investors benefited, in small increments, from shifts in prices going in their favor between the time of purchase to resale. Those gaps led to the quarterly and yearly improvements in investment returns.

“The latest gains for home flippers extended their recovery from an unusual pattern of timing the housing market poorly, which resulted in their profits dropping from 2016 through 2022 while returns for other sellers soared,” the report commented.

It noted that home flips as a portion of all home sales declined between the first and second quarters in 86% of U.S. metros. Flips were highest in Southern cities including four Georgia cities: Warner Robins (20%), Macon (15.4%), Atlanta (13.4%), and Columbus (13.2%). In addition, 12.8% of sales in Memphis were flips. Flip rates were also high in Birmingham, and Cleveland.

When purchasing homes to be flipped, cash was king in 63% of all cases. The average time it took from purchase to resale rose from 164 days in the first quarter to 166 in the second. Of the homes flipped, the FHA backed 11% of buyers.