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Across the country, the get-rich-quick pursuit of house flipping—buying, rehabbing, and reselling homes for a sizable and fast profit—is flopping.
The number of single-family homes and condos flipped in 2023 dropped 29.3% from 2022, to 308,922, the largest decline in 15 years, according to a new report by the real estate data firm ATTOM.
What’s more, gross profits, the difference between the median sales price and the median amount originally paid, sank to just $66,000. That’s only a 27.5% return on investment, the lowest level since 2007. Flipped properties sold for a median of $306,000 last year.
It’s less than the $70,100 flippers pocketed in 2022 and the $75,000 in 2021. Also, that return doesn’t include the cost of all the work the flippers put into the property to get it ready for sale.
“The profit margin stands at less than half of what traditional sellers commonly got last year,” says ATTOM CEO Rob Barber. “A return that low also could easily be wiped out by renovation, mortgage, property tax, and other carrying charges investors must pay between purchase and resale.”
While there are some places where flippers are still raking in strong profits (keep reading!), flippers overall aren’t likely to get a break anytime soon.
“Although there are signs of hope for investors … it is hard to see any notable changes over at least the first half of 2024 in flipping rates or profit margins,” Barber says.
ATTOM’s findings, culled from sales deed data, reflect single-family homes and condos that were sold in arm’s-length transactions twice within 12 months. That’s an indication of a flip.
Where home-flipping rates are up—and down—the most
While the amount of home flipping as a percentage of total sales dropped by more than half (53%) in 112 of the 212 metropolitan areas analyzed by ATTOM, the greatest declines were in the South and the West. This is where profit margins were lowest.
Leading that list is the Gainesville, GA, metro area, where the rate went down from 15.1% in 2022 to 9.9% in 2023. It was followed by Phoenix, where the rate decreased from 16.3% to 11.9%; Prescott, AZ, down from 9.8% to 6%; Charlotte, NC, down from 14.2% to 10.6%; and Provo, UT, down from 10.9% to 7.5%.
But other parts of the South topped the lists of frequent flippers.
The Macon, GA, metro area had the most activity, with the flip rate increasing from 12.1% to 17%. Next up was Gulfport, MS, where it rose from 3.9% to 7.7%; Jackson, MS, up from 5.8% to 8.4%; Columbus, GA, up from 10.9% to 13.5%; and Dayton, OH, up from 10% to 12.4%.
Flippers can still make money—in these five metros
Some of the nation’s largest, most expensive metropolitan areas offered some of the largest profits for flippers. Below are the median amounts flippers in these areas made in 2023. (Only metros with at least 1 million residents were included. The profits do not subtract the amount investors spent on labor, materials, and other costs.)
This home, listed for sale at $2.5 million in San Jose, CA, is described as needing “a little TLC.”
(Realtor.com)
Gross flipping profit in 2023: $275,250
This newly remodeled duplex in San Francisco, CA, is listed for sale at $1.8 million.
(Realtor.com)
Gross flipping profit in 2023: $170,000
This home is being sold “as is” for $669,000 in Boston, MA.
(Realtor.com)
Gross flipping profit in 2023: $158,000
A fully updated Cape Cod in Queens, NY, is listed for sale at $900,000.
(Realtor.com)
Gross flipping profit in 2023: $154,750
A home for sale for $995,000 in San Diego, CA, is described as needing “lots of love and renovations.”
(Realtor.com)
Gross flipping profit in 2023: $153,000
These five metros with the slimmest home-flipping profits
Everything wasn’t bigger in Texas—especially flipping profits last year. The state was home to four of the five metro areas with the smallest profits. (Only metros with at least 1 million residents were included. The profits do not subtract the amount investors spent on labor, materials, and other costs.)
Gross flipping profit in 2023: -$18,640
Gross flipping profit in 2023: $12,289
Gross flipping profit in 2023: $14,816
Gross flipping profit in 2023: $16,932
Gross flipping profit in 2023: $25,000
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This article was originally published by a www.realtor.com . Read the Original article here. .