Flipping Out: Investors’ Profits on Home Sales Shrink

U.S. home flippers can no longer expect the same gains they saw during the start of the pandemic. 

Due to rising mortgage rates and slowing demand, 13.5%—about one in seven—of homes sold by investors were sold at a loss in March, according to a report Friday from Redfin. That’s down from February’s rate of 14.5%, which was the highest on record since 2016. 

“It’s also nearly triple the share of a year earlier and compares with a record low of 2.8% in May,” the report said. 

Meanwhile, in the overall U.S. market, only about 4.8% of homes sold at a loss in March, according to Redfin, which looked at county records and MLS data across 40 of the most populous U.S. metropolitan areas. An investor was defined as “any institution or business that purchases residential real estate, including both large companies and mom-and-pop investors.”

And although most flippers still make money, margins have also gotten slimmer. 

In March, a typical investor sold a home for nearly 46%, or $145,714, more than they paid for it, the figures showed. That’s down from 55.3% ($173,458) a year earlier and a pandemic peak of 67.9% ($199,274) in June 2022. 

Meanwhile, the median sale price of U.S. homes sold by investors was $463,505 in March, down 4.8% annually from $486,980, the report said. 

Depending on how much money was put into the flip, an investor could still lose money even when selling at significantly more than they paid for it.

“I recently showed one of my buyers a three-bedroom single-family home in Glendale [in Arizona] that was listed by an investor,” Van Welborn, a Redfin agent in Phoenix, said in the report. “My client ultimately found another house they liked better, and the investor ended up losing about $20,000. The investor bought the home for $450,000 and sold it for $480,000, but put $50,000 of work into it. The house also sold below the $550,000 list price after sitting on the market for almost four months.”

A greater percentage of investors in Phoenix, along with other cities that boomed during the first part of the pandemic, sold at a loss in March.

Indeed, in the Arizona capital, 30.7% of investor-owned homes were sold at a loss, followed by Las Vegas (28%), Jacksonville, Florida (20.9%), Sacramento, California (20.2%), and Charlotte, North Carolina (17.4%).