Source: ATTOM —
IRVINE, Calif. – Dec. 15, 2022 — ATTOM, a leading curator of real estate data nationwide for land and property data, today released its third-quarter 2022 U.S. Home Flipping Report showing that 92,422 single-family houses and condominiums in the United States were flipped in the third quarter. Those transactions represented 7.5 percent of all home sales in the third quarter of 2022, or one in 13 transactions. The latest portion was down from 8.2 percent, or one in every 12 home sales in the nation during the second quarter of 2022. But it was still up from 5.9 percent, or one in 17 sales, in the third quarter of last year.
Despite the decline, the home-flipping rate during the third quarter of this year still stood at the third-highest level in the past decade, below the high point of 9.7 percent registered in the first quarter of 2022.
“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.”
The report shows that as home selling by investors decreased, typical gross profits on those deals also dropped in the third quarter, hitting their lowest point in almost three years. With the national housing-market boom stalling, gross flipping profits declined in the third quarter as well at the fastest quarterly pace since 2009. More importantly, profit margins on flips also fell precipitously during the third quarter of 2022, to a point not seen in 13 years.
Among all flips nationwide, 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 in the third quarter of 2022. That was down 18.4 percent from $76,000 in the second quarter of 2022 and down 11.4 percent from $70,000 in the third quarter of 2021. The latest profit figure stood at the lowest point since the fourth quarter of 2019, while the quarterly rate of decline marked the worst since early 2009.
Typical profit margins, meanwhile, sank during the third quarter of this year after rising in the prior two quarters. The typical gross-flipping profit of $62,000 in the third quarter of 2022 translated into a 25 percent return on investment compared to the original acquisition price. That was down from 30.2 percent in the second quarter of 2022 and from 31.8 percent a year earlier. 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 percent in late 2016.
So large was the fall in the third-quarter that typical returns were less than 25 percent in nearly half the metropolitan areas around the nation with enough data to analyze, compared to just a third of them earlier in 2022.
Profit margins worsened in the third quarter of 2022 as median resale prices on flipped homes declined faster than they had previously when investors were buying homes.
Specifically, in the third quarter of 2022, the typical resale price on flipped homes declined to $310,000. That was down 5.5 percent from $328,000 in the second quarter of 2022, although still up 6.9 percent from $290,000 a year earlier.
The quarterly drop-off in median resale values was worse than the 1.6 percent 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 the second to the third quarter of 2022.
The third-quarter woes for home flippers added to the growing list of signals that the nation’s decade-long housing market boom is over – or has at least stalled – after nearly tripling home values and sending profits and equity soaring.