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- Although home flips are on the decline, the home-flipping rate during the second quarter of this year stood at the third-highest level since 2000.
- Gross profit on typical transactions among all flips nationwide hit $73,700 — up 10% fr0om the first quarter.
- Typical profit margins rose during the second quarter of this year after six consecutive periods when they had fallen or virtually remained the same.
- The portion of home flips of all home sales decreased from the first quarter in 80% of metropolitan areas around the U.S.
This is down from 9.7%, or one in even 10 home sales, in the nation during the first quarter of 2022, but is still up from 5.3%, or one in every 19 sales, in the second quarter last year.
Although home flips are on the decline, the home-flipping rate during the second quarter of this year stood at the third-highest level since 2000, below the high point registered in the first quarter of 2022. A total of 115,198 single-family houses and condominiums in the United States were flipped in the second quarter.
"The second quarter was another strong showing for fix-and-flip investors,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “The total number of properties flipped was the second-highest total we've recorded in the past 22 years, and the median sales price of a flipped property — $328,000 — was the highest ever.”
The big question, however, is whether the fix-and-flip market will begin to lose steam as overall home sales decline, Sharga said. Home sales have declined dramatically over the past few months, and the cost of financing has virtually doubled over the past year.
The gross profit on typical transactions among all flips nationwide hit $73,700 in the second quarter of 2022. That was up 10% from $67,000 in the first quarter of 2022 and up 10.1% from $66,944 in the second quarter of 2021.
Typical profit margins also rose during the second quarter of this year after six consecutive periods when they had fallen or virtually remained the same. Typical gross profit for the second quarter of 2022 translates into 29% return on investment compared to the original acquisition price. Although that remains down from 33% a year earlier and far below the century-peak of 53.1% in 2016, the latest margin was up from 25.8% in the first quarter of this year.
Profit margins improved as median resale prices trends on flipped homes improved compared to what was happening when investors were buying homes.
In the second quarter of this year, the typical resale price on flipped homes reached another all-time high of $328,000, up slightly from $327,000 in the first quarter and 21.5% from $270,000 a year earlier.
The quarterly gain, while tiny, was better than the 2% decline in prices that investors were seeing when they originally bought their properties. The price change gap between buying and selling resulted in profit margins going up from the first to second quarter in 2022.
The latest trends reflect a segment of the housing market that stayed busier than usual in the second quarter but also continued to earn relatively weak profits that fell well beneath the broader market’s performance.
Flipping Rates Drop 80% In Local Markets
The portion of home flips of all home sales decreased from the first quarter of 2022 to the second quarter in 161 of the 202 metropolitan areas (80%) around the U.S. analyzed in ATTOM’s report.
Metro areas with the largest flipping rates during the second quarter of 2022 were in Tucson, Ariz. (flips comprised 14.5% of all home sales), Phoenix, Ariz. (14.1%), Jacksonville, Fla. (13.8%), Atlanta (13.6%), and Gainesville, Ga. (13.5%).
Three other metro areas with a population of more than 1 million ranked in the top 10 for highest flipping rates in the second quarter. They were Charlotte, NC (13.1%); Tampa, Fla. (12.2%) and San Antonio, Texas (11.9%).
The smallest home-flipping rates among the metros analyzed were in Honolulu (1.7%) and Hilo, Hawaii (3.1%); Wichita, Kan. (3.5%); Bremerton, Wash. (4%), and Seattle (4.3%).
"Fix-and-flip activity is mirroring overall housing market trends, with much of the activity, and the highest returns largely coming from the West and Southeast," Sharga said. "In fact, even though the highest gross profits came from the most expensive states, 14 of the 18 states where flips accounted for a higher percentage of overall home sales than the national average were in the South, Southeast, and Western states."
The biggest quarterly increases in profit margins came in Huntsville, Ala. (ROI up from 18.2% in the first quarter of 2022 to 84.5% in the second quarter of 2022); Tallahassee, Fla. (up from 42.1% to 94.6%); Buffalo, N.Y. (up from 88.2% to 133.3%); Canton, Ohio (up from 22.8% to 63.9%), and Fort Smith, Ariz. (up from 38.7% to 76.6%).
Markets with the largest returns on investment for typical home flips completed during the second quarter of 2022 were Buffalo (133.3% return), Pittsburgh (127.3%); Lake Charles, La. (125.5%); and Scranton (109.9%) and Harrisburg, Pa. (96%).
The largest investment returns in the second quarter among metro areas with a population of at least 1 million were in Philadelphia (82.1%); Detroit (77.8%), and Baltimore (73.5%).
Metro areas with the smallest profit margins on typical home flips in the second quarter of 2022 were Tyler, Texas (1.4% return); Jackson, Miss. (1.9%); Boise, Idaho (4.5%); Medford, Ore. (8.6%) and Lafayette, La. (9.7%).
Raw Profits By Region
The highest profit margins on median-priced home flips in the second quarter of 2022, measured in dollars, remained concentrated in the West and Northeast. Sixteen of the top 20 were in those regions, led by San Jose, Calif. (typical gross profit of $292,500); San Francisco ($250,000); Salinas, Calif. ($203,125); San Diego ($177,000) and Seattle ($174,999).
Opposingly, 17 of the 20 lowest raw profits on typical home flips were spread across the South and Midwest. The smallest were in Tyler, Texas ($4,000); Jackson, Miss. ($5,223); Lafayette, Ind. ($15,518); Boise, Idaho ($20,133) and Lexington, Ky. ($23,500).
All-Cash Investing Dips
Across the nation, 60.3% of homes flipped in the second quarter had been purchased with all cash by investors. That figure is down from 63.2% in the first quarter of 2022 and from 60.9% in the second quarter of 2021. Meanwhile, 39.7% of homes flipped in the second quarter had been bought with financing, up from 36.8% in the prior quarter and from 39.1% a year earlier.
Those with the highest percentage of flips in the second quarter of 2022 that had been purchased with cash were in Buffalo (80%), Detroit (77.7%); Tucson (76.4%); Cincinnati (74.7%) and Cleveland (74.5%).
- Investor resales to FHA buyers drop to 15-year low
- Only 7.5% were sold to buyers using loans backed by the Federal Housing Administration (FHA).
- Those with the highest percentage of flipped properties sold to FHA buyers: Modesto, Calif. (27.9%); Visalia, Calif. (25.9%); Lake Charles, La. (21.1%); Springfield, Mass. (19.9%) and Fort Smith, Ariz. (18.1%).