US Home Flipping Transactions Plummet in 2023, But Profits Soar!

Discover how home flipping transactions in the US witnessed a sharp decline in 2023, yet yielded significant profits. Explore ATTOM Data's second-quarter report and its insights into the thriving US real estate market.

Based on ATTOM Data's second-quarter 2023 U.S. Home Flipping Report, we delve into the fascinating world of home flipping and its impact on the real estate market in the United States. With 84,350 single-family homes and condominiums flipped during the second quarter of 2023, equivalent to 8 percent of all home sales, it's clear that flipping remains a popular investment strategy.

While the flipping rate has slightly decreased compared to previous quarters, it is important to note that investor profits and profit margins are on the rise. This is promising news for those involved in the real estate industry, as it indicates a recovery from the profit slump witnessed in recent years.

Investment returns climbed at the fastest pace since 2020, and raw profits experienced a significant spike. The typical profit margin has also witnessed a rise, although it is still below peak levels achieved in 2021. Nevertheless, these improvements demonstrate the resilience and potential profitability of the home flipping market.

This upward trend in profit margins aligns with the broader recovery of the U.S. housing market. The Spring buying season saw a considerable 10 percent spike in the median single-family home price following a period of decline. This resurgence in prices has undoubtedly contributed to the overall improvement in home-flipping profits.

Among flips nationwide, the gross profit on typical transactions increased to $66,500 in the second quarter of 2023, representing a rise from the previous quarter. However, it is important to note that this figure remains lower compared to the second quarter of 2022. Despite this, the typical gross flipping profit still provides a solid return on investment of 27.5 percent.

Profit margins also witnessed a positive upward trend, improving in two-thirds of the nation. This indicates that investors are increasingly taking advantage of favorable shifts in property prices during the buying and selling process. The recent pattern of higher profits on flipped homes contrasts with the previous two years when returns were declining despite overall market prosperity.

Home flipping rates have decreased in nearly 90 percent of the analyzed metropolitan statistical areas across the United States. Flipping rates dropped notably in several cities, including Macon, GA, Columbus, GA, Spartanburg, SC, Atlanta, GA, and Akron, OH. These areas experienced a significant decline in the percentage of flips relative to all home sales.

Conversely, some metropolitan areas showcased higher flipping rates. Memphis, TN, Jacksonville, FL, Cincinnati, OH, and Phoenix, AZ all experienced substantial flipping activity, signaling the potential profitability of these markets.

The average time it took from purchase to resale on home flips rose to 178 days in the second quarter of 2023, marking the highest duration in three years. This increase highlights the importance of patience and strategic planning in the home flipping industry. Investors must be aware of market trends and adapt their strategies accordingly to maximize profits.

In terms of financing, cash purchases have slightly declined, accounting for 62.6 percent of home flips in the second quarter of 2023. Conversely, financed purchases have increased to 37.4 percent during the same period. These figures indicate the importance of exploring various financial options when considering home flipping investments.

The highest raw profits on median-priced home flips were concentrated in the South and Northeast regions of the country. San Jose, CA, San Francisco, CA, Vallejo, CA, San Diego, CA, and Boston, MA ranked among the top cities with the highest gross profits. On the other end of the spectrum, Austin, TX, Reno, NV, and Killeen, TX experienced lower raw profits on median-priced transactions.

Despite the challenges posed by market fluctuations, home flipping remains a viable investment strategy in many regions. The potential for profitable returns is evident, as long as investors analyze market data, adapt to changing trends, and implement effective strategies.