The home-flipping rebound is for real as profits jump after a bleak stretch, real estate tracker says
- Home-flipping margins and profits hit their highest level since mid-2022, ATTOM reported.
- Gains in home prices this year helped boost the values of flipped properties.
Home-flipping activity dropped again in the third quarter, but margins reached their highest level since mid-2022, ATTOM reported.
For three consecutive quarters, profits have risen for home flippers as home prices shifted in their favor this year. That helped boost the value of the renovated properties between the time investors bought and sold them.
This generated a gross profit of $70,000, up from the second quarter's $66,500. Though still well below a 2022 all-time high of $102,063, it demonstrates a steadily rebounding investment sector.
Similarly, profit margins grew to 29.8% from 29% in the second quarter and the recent low of 22.4% in last year's fourth quarter. That's after margins were slashed by nearly two-thirds between early-2021 and 2022.
"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," ATTOM CEO Rob Barber said in the report. "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."
Despite improvement, this didn't translate into a higher home flipping rate, which fell from 7.9% to 7.2% between the second and third quarters. It now stands at its lowest point in two years.
Home flippers are likely experiencing the same issues that have plagued others in the housing market, including an inventory shortage and high mortgage rates. In fact, all-cash deals grew slightly among these investors through the third quarter, as the 30-year fixed mortgage neared 8%.
Still, home flippers appear optimistic for 2024. The latest report from New Western found that 53% of real estate investors expect their business to grow at least 25% next year.