First-Quarter Home-Flipping Improves, But It's Still Near Lowest Level Since 2000

TV reality shows make home flipping look easy and leave viewers with the impression that it’s a profitable industry.

Although many people succeed in turning a profit, the truth is that it’s not as simple as it looks — a fact real estate data analytics firm ATTOM reveals in its first-quarter 2023 U.S. Home Flipping report.

The report shows that 72,960 single-family homes and condominiums flipped in the first quarter, accounting for 9% of all sales. That’s down from 9.4% during the first quarter of 2022 but up from 8% in the fourth quarter of last year.

While flipping activity rose, raw profits and profit markets showed mixed results. Profits and investment returns increased between the fourth quarter and the first quarter, but they remained near their low points over the past decade.

The quarterly profit margin gain of 22% was a modest increase after three years of nearly continuous declines that began before the broader market started slowing down last year.

“Home-flipping investors across the U.S. may have finally halted the decline,” ATTOM CEO Rob Barber said. “In the first quarter, profit margins showed a slightly upward turn after an extended slump, while interest in flipped homes continued to rise among buyers.

“However, investors shouldn’t assume they’re out of the woods just yet. Home-flipping carrying costs can easily erase a 22% return on gross profits, and it’s possible that the recent gain is merely a temporary blip. Nevertheless, the first-quarter trends offer some hope for investors indicating that brighter times may lie ahead.”

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Profits Creeping Up

The gross profit on typical transactions — the difference between the median purchase price investors paid and the median resale price — increased to $56,000 in the first quarter. While that’s still down 20% from $70,000 during the first quarter of 2022, it’s up 4.7% from $53,500 in the fourth quarter of last year.

The resale price on flipped homes increased 1.7% from $300,000 in the fourth quarter of 2022 to $305,000 in the first quarter of this year — better than the 1% increase in median price recent home flippers were seeing when they bought their properties.

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Although profits are modest, they’re better than the last three years when investment returns mostly dropped — despite prices and profits for traditional sellers during a decade-long boom in the overall market.

While home values across the country have dropped since the second quarter of last year, with the national median price down 7%, flipping profits started to reverse course early this year.

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