Home Flipping on the Rise, Even as Profit Margins Drop
September 16, 2021
The home flippers are returning to the market, even as their profit margins have dipped to a 10-year low.
About 4.9% of all home sales in the second quarter were from home flipping—defined as a single-family home or condo transaction that was bought and sold within 12 months. The home flipping rate is up from 3.5% in the first quarter of 2021 but still remains below levels throughout most of the last decade, according to ATTOM Data Solutions’ latest 2021 U.S. Home Flipping Report.
Profits are less for a home flip. The gross profit on a typical home flip—the difference between the median sales price and the median paid by investors—was $67,000 in the second quarter. That is a 33.5% return on investment compared to the original acquisition price—down from 40.6% a year earlier and the lowest point since the first quarter of 2011.
Meanwhile, the median price of homes flipped in the second quarter climbed to an all-time high of $267,000, up 18.7% from a year earlier. Those price increases, however, failed to surpass the increases that investors were absorbing when they purchased the homes they sold in the second quarter, according to the study. The gap—prices rising more on a purchase than resale—led to profit margins dropping, researchers note.
“Home flipping rebounded during the second quarter, but profits sure didn’t,” says Todd Teta, chief product officer at ATTOM. “The typical home flip around the country netted the smallest return on investment in a decade. However, it’s not like home flipping has become a losing proposition. A 33 percent profit on a short-term investment remained pretty decent, even after renovation and holding expenses. But with a few more periods like the second quarter of this year, investors may need to reframe how they look at these deals.”
The largest home flipping rates in the second quarter occurred in:
- Savannah, Ga. (flips comprised 9.5% of all home sales)
- Fort Wayne, Ind. (9.3%)
- Canton, Ohio (9%)
- Ogden, Utah (8.9%)
- Indianapolis (8.9%)
The metro areas with the highest returns on investment for a home flip in the second quarter were:
- Oklahoma City, Okla. (ROI of 196.4%)
- Fargo, N.D. (185.7%)
- Pittsburgh, Pa. (154.2%)
- Omaha, Neb. (135%)
- York, Pa. (115.1%)
“Home Flipping Increases While Profit Margins Continue to Drop Across U.S. in Second Quarter of 2021,” ATTOM Data Solutions (Sept. 15, 2021)
Updated: October 27, 2021