Home Flipping Activity Dips Slightly
Profits Inch Up Across U.S. in Second Quarter of 2024
by ATTOM Team
ATTOM, a leading curator of land, property data, and real estate analytics, released its second-quarter 2024 U.S. Home Flipping Report showing that 79,540 single-family homes and condominiums in the United States were flipped in the second quarter. Those transactions represented 7.5%, or one of every 13 home sales, nationwide during the months running from April through June of 2024.
The latest portion of flipped properties was down from 8.7% of all sales in the U.S. during the first quarter of 2024 — a common pattern during the busy annual Springtime buying season each year when other types of home sales spike. The flipping rate was also down slightly from 7.9% a year earlier.
While the rate declined, fortunes kept ticking upward for investors who buy, renovate and quickly resell homes. The latest data showed that investors typically earned a 30.4% profit nationwide before expenses on homes sold during the second quarter of this year, marking the fourth time in five quarters that margins increased following a six-year period of nearly continuous drop-offs.
The typical profit margin on homes flipped during the second quarter of 2024 — based on the difference between the median purchase and median resale price for home flips— remained about 25 percentage points below peaks hit in 2016. It also stayed within a range that could easily be wiped out by carrying costs that include renovation expenses, mortgage payments and property taxes, revealing anew the struggles home flippers are having in turning healthy profits.
But the return on investment was up slightly from both the first quarter of 2024 and from a low point over the past decade of about 25% in the first quarter of last year.
Gross profits on typical flips around the country, meanwhile, increased to about $73,500. That remained down from a high of almost $81,000 reached in 2022, but up from $70,000 in the first quarter of 2024 and more than $12,000 above last year’s low point.
“The Spring home-buying season of 2024 brought another sign of hope for home flippers that the rebound in fortunes that began for them last year was more than just a temporary thing,” said Rob Barber, CEO for ATTOM. “It’s not as if profits have shot through the roof and investors are riding a new wave of good times. Far from it, as they continue to struggle to benefit from the broader market boom. But the second-quarter numbers did show another step in the right direction.”
He added that “with the market rising amid tight supplies of homes for sale around the country and falling interest rates, conditions appear ripe for more improvement over the rest of the year as long as prices don’t shoot up past what most buyers can afford.”
The small changes in flipping activity and profit margins during the second quarter came during yet another period of mixed patterns for the home-flipping industry compared to the U.S. housing market.
Overall, home prices rebounded strongly during the second quarter from a varied period of gains and losses during the prior 12-month period. Median prices for all single-family homes and condos nationwide rose 9% quarterly and 6% annually.
But home-flipping resale prices rose far less, with the median inching up only 2% quarterly and annually to $315,000. Nevertheless, that was enough to boost flipping profit margins as investors benefitted, in small increments, from shifts in prices going in their favor between the time of purchase to resale. Those gaps led to the quarterly and yearly improvement in investment returns.
The latest gains for home flippers extended their recovery from an unusual pattern of timing the housing market poorly, which resulted in their profits dropping from 2016 through 2022 while returns for other sellers soared.
Home-Flipping Rates Dip Downward
Home flips as a portion of all home sales decreased from the first quarter of 2024 to the second quarter of 2024 in 159 of the 185 metropolitan statistical areas around the U.S. with enough data to analyze (85.9%). They went down annually in 115, or 62.2%, of those markets. Measured against the same peak buying period of 2023, most flipping rates declined less than one percentage point. (Metro areas were included if they had a population of 200,000 or more and at least 50 home flips in the second quarter of 2024).
Among the metro areas analyzed, the largest flipping rates during the second quarter of 2024 were in:
» Warner Robins, GA (flips comprised 20.7% of all home sales)
» Macon, GA (15.4%)
» Atlanta, GA (13.4%)
» Columbus, GA (13.2%)
» Memphis, TN (12.8%)
Aside from Atlanta and Memphis, the highest second-quarter flipping rates among metro areas with a population of more than 1 million were in:
» Birmingham, AL (11.7%)
» Cleveland, OH (11%)
» Columbus, OH (10.7%)
The smallest home-flipping rates were in:
» Hilo, HI (3.3%)
» Honolulu, HI (3.5%)
» Seattle, WA (4%)
» San Jose, CA (4.1%)
» Portland, OR (4.2%)
Typical Home-Flipping Returns up Y-O-Y
The median $315,000 resale price of homes flipped nationwide in the second quarter of 2024 generated a gross profit of $73,492 above the median investor purchase price of $241,508. That resulted in a typical 30.4% gross profit margin before expenses in the second quarter of 2024, up about one point from 29.2% in the first quarter of 2024 and up from 27.8% in the second quarter of last year. But the latest nationwide figure still remained far beneath the 56.3% level in mid-2016 and from a more recent peak of 48.8% in 2020.
Profit margins increased from the first to the second quarter of this year in 93 of the 185 metro areas analyzed (50.3%) and were up annually in 107 of those markets (57.8%).
Metro areas with the biggest year-over-year increases in typical profit margins during the second quarter were:
» Akron, OH (ROI up from 30.9% in the second quarter of 2023 to 78.1% in the second quarter of 2024)
» Cape Coral-Fort Myers, FL (up from 13.8% to 56.4%)
» Springfield, IL (up from 34.5% to 75%)
» Gainesville, FL (up from 30.2% to 65.3%)
» Spokane, WA (up from 28.6% to 61.4%).
The biggest annual increases in typical profit margins among metro areas with a population of at least 1 million came in:
» Buffalo, NY (ROI up from 66.7% in the second quarter of 2023 to 95.7% in the second quarter of 2024)
» Cleveland, OH (up from 40% to 66.7%)
» Memphis, TN (up from 52.6% to 73.5%)
» Tulsa, OK (up from 39.7% to 59.2%)
» Cincinnati, OH (up from 40.6% to 58%).
The recent gains resulted in typical gross profit margins of at least 30% in 105, or almost six of every 10 metros with enough data to analyze in the second quarter of 2024. That was exactly the same number as a year earlier. Typical profit margins surpassed 50% in the second quarter of this year in only one-third of the areas reviewed.
