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Nationwide Home-Flipping Rate Jumps to Highest Level This Century;
Raw Profits on Home Flips Increase for First Time Since 2020;
But Typical Profit Margins on Flips Decline Again, to Lowest Point Since 2009
IRVINE, Calif., June 23, 2022 /PRNewswire/ — ATTOMa leading curator of real estate data nationwide for land and property data, today released its first-quarter 2022 US Home Flipping Report showing that 114,706 single-family houses and condominiums in the United States were flipped in the first quarter. Those transactions represented 9.6 percent of all home sales in the first quarter of 2022, or one in 10 transactions – the highest level since at least 2000. The latest total was up from 6.9 percent, or one in every 14 home sales in the nation during the fourth quarter of 2021, and from 4.9 percent, or one in 20 sales, in the first quarter of last year.
The jump in the home-flipping rate during the first quarter of this year marked the fifth straight quarterly increase. It also represented the largest quarterly and annual percentage-point gains since 2000.
But the report also shows that as home sales by investors spiked, typical raw profits on those deals remained below where they were a year ago, and in a more striking trend, profit margins dipped to their lowest point since 2009.
“The good news for fix-and-flip investors is that demand remains strong from prospective homebuyers, as evidenced by this quarter’s report, which shows that one of every 10 homes sold during Q1 was a flip,” said Rick Shargaexecutive vice president of market intelligence for ATTOM. “The bad news is that rising mortgage interest rates are beginning to slow down home price appreciation rates, and buyers have become more selective – and less willing to outbid other buyers for properties they’re interested in. This is having a predictable impact on profit margins for investors.”
Among all flips nationwide, the gross profit on typical transactions (the difference between the median purchase price paid by investors and the median resale price) stood at $67,000 in the first quarter of 2022. While that was up 5.5 percent from $63,500 in the fourth quarter of 2021, and represented the first increase since late 2020, it was 4.3 percent less than the $70,000 level recorded in the first quarter of 2021.
Profit margins, meanwhile, fell for the sixth quarter in a row, as the typical gross-flipping profit of $67,000 in the first quarter of 2022 translated into just a 25.8 percent return on investment compared to the original acquisition price. The national gross-flipping ROI was down from 27.3 percent in the fourth quarter of 2021 and from 38.9 percent a year earlier. It sat at the lowest point since the first quarter of 2009, when the housing market was slumping from the effects of the Great Recession in the late 2000s.
The latest return on investment also was less than half the peak of 53.1 percent for this century, which hit in late 2016.
Profit margins declined in the first quarter of 2022 as resale prices on flipped homes continued to shoot up more slowly than they were when investors originally bought their properties.
Specifically, the median price of homes flipped in the first quarter of 2022 increased to another all-time high of $327,000. That was up 10.5 percent from $296,000 in the fourth quarter of 2021 and 30.8 percent from $250,000 a year earlier. …
Full story available on Benzinga.com
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