In the third quarter of 2023, the home flipping rate in the United States dropped to 7.2%, accounting for one of every 14 home sales during this period, according to ATTOM's U.S. Home Flipping Report for Q3 2023. Although the flipping rate declined from 7.9% in the previous quarter and 7.7% in the same quarter the previous year, it remained historically high. This marks the second consecutive quarter of declining flipping rates, reaching the lowest point in two years.
Despite the declining flipping rates, home flippers experienced improved profitability in the third quarter. Investor returns have increased for three consecutive quarters, recovering from a significant slump that saw profit margins drop by nearly two-thirds from early 2021 to late 2022. In Q3 2023, profit margins reached 29.8% nationwide, based on the difference between the median purchase and resale prices for flipped homes. Although this remains below peak levels seen in 2021, it represents an improvement from 29% in the previous quarter and a low of 22.4% in Q4 2022.
Raw profits on typical flips across the country also rose to $70,000, an increase from the second quarter of 2023 and $15,000 more than the low point recorded in the previous year.
“The comeback for the home-flipping industry is looking more like a real trend than a temporary break in what had been a pretty bleak couple of years,” said Rob Barber, CEO for ATTOM. “For sure, investment returns still aren’t anywhere close to where they were a couple of years ago. The latest nationwide profit margin also remains barely within the spread that covers the usual holding costs on flips, with wide variations around the country. Nevertheless, home flippers continue to head back in the right direction.”
The increase in profits and profit margins in Q3 2023 can be attributed to shifts in prices that favored home flippers from the time of property purchase to resale. Although the resale price for flipped homes decreased by 1.5% to $305,000 in the third quarter, it was less than the 2.1% drop in median prices when flippers were acquiring properties. This smaller decline in resale prices contributed to improved profitability.
The report also highlighted regional variations in flipping rates, with the South having the highest rate at 9.1%, followed by the West (8.1%), Midwest (6.5%), and Northeast (5.2%).
Investors who bought homes with cash accounted for 62.9% of flipped homes in Q3 2023, up slightly from the previous quarter. Meanwhile, 37.1% of flipped homes were purchased with financing, slightly down from the previous quarter.
The average time it took for a home to be flipped, from purchase to resale, decreased to 161 days in Q3 2023, the lowest level since Q4 2021.
The report also noted that the percentage of flipped properties sold to buyers using Federal Housing Administration (FHA)-backed loans decreased in Q3 2023, marking the first quarterly decline in over a year.
In terms of counties, 17.9% had home-flipping rates of at least 10%, a decrease from the previous quarter. Somerset County, MD, led with a flipping rate of 22%, followed by counties in Georgia and Virginia.
The overall trends in the home-flipping market suggest continued resilience and profitability for investors despite declining flipping rates.
