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House Flipping Up, Profits Down In 2022: ATTOM

David Krechevsky
Mar 24, 2023
U.S. Home Flipping ROI 2022

House flips reached their highest level in 17 years, but ROI was lowest since 2008.

  • The decline in ROI was the second major drop in two years and the fifth drop in six years.
  • Home-flips represented 8.4% of all home sales last year, up from 5.9% in 2021.

Home-flipping in the United States hit the highest level in 17 years, but the return on investment fell to its lowest level since 2008, according to a report from ATTOM.

The Irvine, Calif.-based curator of land, property, and real estate data released its year-end U.S. Home Flipping Report for 2022 on Thursday, showing that 407,417 single-family homes and condos in the U.S. were flipped, up 14% from 357,666 in 2021 and up 58 percent from 2020, to the highest point since at least 2005. 

The number of homes flipped by investors last year represented 8.4% of all home sales, up from 5.9% in 2021 and from 5.8% in 2020. The total also was the most since at least 2005, the company said. 

Still, gross profit margins on home flips last year sank to their lowest level since 2008, following the second major drop in two years.

“Last year, home flippers throughout the U.S. experienced another tough period as returns took yet another hit. For the second straight year, more investors were flipping but found no simple path to quick profits,” said ATTOM CEO Rob Barber. “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.”

Homes flipped in 2022 typically generated a gross profit — the difference between the median sales price and the median amount originally paid by investors — of $67,900 nationwide. That was down 3% from $70,000 in 2021 and translated to just a 26.9% return on investment (ROI) compared to the original acquisition price. 

Barber said 2023 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.”

The latest nationwide ROI (before accounting for mortgage interest, property taxes, renovation expenses, and other holding costs) was down from 32.6% in 2021 and from 41.9% in 2020.

5th Drop In 6 Years

Investors saw their profit margins drop for the fifth time in the past six years, as the median value of the homes they flipped rose more slowly (up 12%) than the median price they paid to purchase properties (up 17%), ATTOM said.

While this niche of the U.S. housing market continues to grow, the decline in home-flipping profits in 2022 continued to cast it in a negative light as investors struggle to figure out how to profit from changing price trends.

The latest decline came during a year when the nation’s decade-long home-price runup began to stall, leading to the weakest annual gains in three years and even a decline in the second half of 2022, ATTOM said. 

That happened as rising home mortgage rates, consumer price inflation, and other forces cut into what home seekers could afford, reducing demand and cutting into the prices investors were able to get on resale. 

Profits for home flippers began diminishing in 2017, even as the broader housing market was booming.

"While declining margin is certainly a cause for caution, it is important to remember that these numbers are somewhat backward looking in that they reflect dispositions of properties that were acquired in 2021 or early 2022 amidst the COVID-induced bidding wars in many locales,” said Maksim Stavinsky, co-founder and president of Roc360, a financial services platform that serves residential real estate investors. “On the other hand, it is encouraging that investors were able to clear in excess of 400,000 properties — the most ever — in an environment of rising interest rates, without a meaningful increase in project timelines.”  

Roc360 last week announced the closing of its asset acquisition of Finance of America Commercial, a business-purpose loan originator, so it is continuing to bet on growth in the space, ATTOM noted.

By Region

Home flips as a portion of all home sales increased from 2021 to 2022 in 216 of the 218 metropolitan statistical areas analyzed in the report (99 percent). 

Among the 25 largest increases in annual flipping rates, 20 were in the South and West. They were led by Burlington, Vt. (rate up 283.7%); Prescott, Ariz. (+183.1%); Bremerton, Wash. (+182.7%); Jackson, Mo. (+176%) and Honolulu, Hawaii (+172.6%). Metro areas qualified for the report if they had a population of at least 200,000 and at least 100 home flips in 2022, ATTOM said.

Aside from Honolulu, the biggest increases in flipping rates in 2022 in metro areas with a population of 1 million or more were in Sacramento, Calif. (+116.4%); Atlanta (+94.3%); Minneapolis, Minn. (+72.8%) and Orlando, Fla. (+72.2%).

The only metro areas where home flipping rates decreased from 2021 to 2022 were New Orleans (-8.2%) and Green Bay, Wis. (-2.9%).

All-Cash Deals Rise

Nationally, the percentage of flipped homes purchased with financing decreased in 2022 to 35.2%, down from 35.9% in 2021 and 41% in 2020.

Meanwhile, 64.8% of homes flipped in 2022 were bought entirely with cash, up from 64.1% in 2021 and 59% in 2020.

Among metro areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flipped homes purchased by investors with financing in 2022 included Boston (53.7%); San Diego (51%); Seattle (50.8%); Providence, R.I. (50.5%) and San Jose, Calif. (50.1%).

In that same group, the metro areas with the highest percentage of flips purchased with all cash included Detroit (84.7%); Atlanta (80.7%); Buffalo, N.Y. (80.6%); Indianapolis, Ind. (77.4%) and Cleveland (77.1%).

Profits Down 3% 

Homes flipped in 2022 were sold for a median price nationwide of $320,000, generating a gross flipping profit of $67,900 above the median original purchase price paid by investors of $252,100. That national gross-profit figure was down 3% from $70,000 in 2021 (the high point since at least 2005) but still up 4.3% from $67,000 in 2020.

Among the 56 metro areas in the U.S. with a population of 1 million or more, those with the largest gross flipping profits in 2022 were San Jose ($242,625); San Francisco ($163,000); Washington, D.C. ($146,728); New York (141,332) and Seattle ($137,664).

The lowest gross flipping profits among metro areas with a population of at least 1 million in 2022 were in Kansas City, Mo. ($26,963); San Antonio, Texas ($29,000); Houston ($29,901); Indianapolis ($34,532) and Dallas ($36,970).

The gross profit margin on the typical home flip in the U.S. last year fell to 26.9% — the smallest ROI since at least 2005. The ROI on median-priced home flips nationwide has dropped 15% points since 2020 and is off by 24 points since 2016.

Margins fell last year as the median nationwide resale price on flipped homes increased just 12.3%, from $285,000 in 2021 to $320,000 in 2022. That was less than the 17.3% increase in the price investors were paying when they bought homes (from $215,000 to $252,100).

The typical home-flipping ROIO decreased from 2021 to 2022 in 168, or 77%t, of the 218 metro areas analyzed.

Among metro areas with a population of 1 million or more, the biggest percentage-point decreases in profit margins during 2022 were in Rochester, N.Y. (ROI down from 100.4% in 2021 to 55.6% in 2022); Oklahoma City (down from 63.6% to 35.1%); Philadelphia (down from 106.3% to 78%); Richmond, Va. (down from 91.4% to 68.6%) and Washington, D.C. (down from 61% to 42.7%).

In that same group of markets with populations of at least 1 million, ATTOM said, the largest increases in returns on investment on the typical home flips were in Cleveland (ROI up from 26.8% in 2021 to 41.4% in 2022); New Orleans (up from 54.1%t to 64.6%); Cincinnati (up from 38.4% to 47.4%); Honolulu (up from 5.7% to 7.4%) and Orlando (up from 17.6% to 18.7%).

Among metro areas with a population of at least 1 million, the biggest gross profit margins in 2022 were in Pittsburgh (114.2%); Buffalo (90.7%); Philadelphia (78%); Baltimore (72.9%) and Richmond (68.6%). The smallest were in Honolulu (7.4%); Austin (8.2%); Sacramento (9.4%); Phoenix (10.6%) and Houston (11.3%).

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