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ATTOM’s Q1 2023 U.S. Home Flipping Report shows that 72,960 single-family homes and condominiums in the nation were flipped in the first quarter of the year—representing 9% of all sales nationwide. Year-over-year, this reading was down from 9.4% of all home sales in the nation during Q1 of 2022, but was still up from 8% in Q4 of 2022, hitting the second-highest level this century.
The report also revealed that while flipping activity rose, mixed trends emerged for raw profits and profit margins. Profits and investment returns both increased slightly from Q4 of 2022 to Q1 of 2023, but both also remained near low points over the past decade, reflecting ongoing financial struggles for home flippers.
The quarterly gain in the typical profit margin, of 22%, represented a modest reversal of fortune for investors following three years of nearly continuous declines that began well before a slowdown in the broader U.S. housing market last year.
"Home-flipping investors across the U.S. may have finally halted the decline," said Rob Barber, CEO of ATTOM. "In the first quarter, profit margins showed a slight upward turn after an extended slump, while interest in flipped homes continued to rise among buyers. However, investors shouldn't assume they're out of the woods just yet. Home-flipping carrying costs can easily erase a 22% return on gross profits, and it's possible that the recent gain is merely a temporary blip. Nevertheless, the first-quarter trends offer some hope for investors indicating that brighter times may lie ahead."
Among flips nationwide, the gross profit on typical transactions (the difference between the median purchase price paid by investors and the median resale price) increased to $56,000 in Q1 of 2023, down 20% from the $70,000 reported in Q1 of 2022, and still stood at one of the lowest points since the U.S. housing market began recovering in 2012 from the Great Recession that struck in the late 2000s. Nevertheless, the total profit of typical flips nationwide was up 4.7% from $53,500 in Q4 of 2022.
The typical gross flipping profit of $56,000 in Q1 of 2023 translated into a 22.5% return-on-investment (ROI) compared to the original acquisition price. While the typical margin remained down from 26.9% in Q1 of 2022–and was still less than half of the 51.5% level recorded in the middle of 2020—it inched up from 21.7% in Q4 of 2022.
Profits and profit margins turned around a bit in Q1 of 2023, as median resale prices on flipped homes went up slightly faster than they were rising when investors were buying homes.
Specifically, in Q1 of 2023, the typical resale price on flipped homes increased 1.7%, from $300,000 in Q4 of 2022 to $305,000 in Q1 of this year—better than the 1% increase in the median price that recent home flippers were commonly seeing when they originally bought their properties. The recent profit turnaround–modest as it was–continued an unusual pattern of home flipping fortunes running counter to the broader housing market nationwide. For the prior three years, investment returns were mostly dropping. That was happening despite prices and profits for traditional sellers soaring during an extended, decade-long boom period for the overall market.
Home flips as a portion of all home sales increased from Q4 of 2022 to Q1 of 2023 in 128 of the 172 metropolitan statistical areas around the U.S. with enough data to analyze (74%). The increases were mostly by less than two percentage points. Among those metros, the largest flipping rates during Q1 of 2023 were found in:
- Macon, Georgia, where home flips comprised 16.8% of all home sales
- Atlanta, where home flips comprised 15.3% of all home sales
- Jacksonville, Florida, where home flips comprised 15.2% of all home sales
- Memphis, where home flips comprised 14.4% of all home sales
- Clarksville, Tennessee, where home flips comprised 14.3% of all home sales
Aside from Atlanta, Jacksonville, and Memphis, the largest flipping rates among metro areas with a population of more than one million were found in Phoenix (13.9%) and Charlotte, North Carolina (13.2%).
The smallest home-flipping rates among metro areas analyzed in Q1 were found in:
- Indianapolis (4%)
- Wichita, Kansas (5%)
- Bridgeport, Connecticut (5%)
- Madison, Wisconsin (5.2%)
- South Bend, Indiana (5.3%)
The median $305,000 resale price of homes flipped nationwide in Q1 of 2023 generated a gross profit of $56,000 above the median investor purchase price of $249,000. That resulted in a typical 22.5% profit margin, up from 21.7% in Q4 of 2022. Profit margins rose quarterly in 103 of the 172 metro areas analyzed (60%), although they were still below levels from Q1 of 2022 in 132, or 77%, of those markets.
Some of the biggest quarterly increases in the typical profit margin during the early months of 2023 came in:
- Shreveport, Louisiana (ROI up from 38.6% in Q4 of 2022 to 92% in Q1 of 2023)
- Lafayette, Louisiana (up from 25.5% to 72.8%)
- Savannah, Georgia (up from 14.3% to 56.8%)
- South Bend, Indiana (up from 8.5% to 49.4%)
- Peoria, Illinois (up from 40.7% to 75.7%)
Despite the quarterly gains, typical flipping profits remained less than 30% in 81 of the 172 metros with enough data to analyze in Q1 of 2023 (47%) slightly better than the level in Q4 of last year, but it still was worse than the level of a year earlier, when profit margins on median-priced home flips fell below 30% in just a third of those metro areas. Three years ago, typical investment returns were that low in only a quarter of the same metro areas.
Markets with the largest returns on investment for typical home flips completed during Q1 of 2023 were found in:
- Scranton, Pennsylvania (121.9% return)
- Pittsburgh (109.8%)
- Flint, Michigan (94.9%)
- Shreveport, Louisiana (92%)
- New Orleans (84.6%)
Aside from Pittsburgh and New Orleans, the largest investment returns in Q1 among metro areas with a population of at least one million were in Philadelphia with 78.8%; Baltimore with 69.9%; and Detroit with 68.6 %.
Metro areas reporting the weakest returns on typical home flips in Q1 of 2023 were found in:
- Austin, Texas (10.2% loss)
- Phoenix (2.4% loss)
- Ogden, Utah (0.5% loss)
- Las Vegas (0.3% loss
- Boise, Idaho (0.8% profit)
Examining home flip sales by loan type, of the 72,960 U.S. homes flipped in Q1 of 2023, 11% were sold to buyers using loans backed by the Federal Housing Administration (FHA), marking the third consecutive quarterly gain. The latest portion was up from 9.8% in the prior quarter, and 7.8% a year earlier.
Among metro areas with a population of at least 200,000 and at least 50 home flips in Q1 of 2023, those with the highest percentage of flipped properties sold to FHA buyers (typically first-time home purchasers) were found in:
- Modesto, California (32%)
- Bakersfield, California (25.7%)
- Visalia, California (24.4%)
- Stockton, California (23.8%)
- Lakeland, Florida (22.2%)
Click here for more information on ATTOM’s Q1 2023 U.S. Home Flipping Report.
