Home-flipping activity and home-flipping profits went in two squarely different directions during first-quarter 2022, according to the most recent U.S. Home Flipping Report from Attom Data Solutions.
According to the real estate analytics company, 114,706 single-family homes and condominiums were flipped in the opening three months of the year. That’s 9.6% of all home sales during that time frame, up from 6.9% in the preceding quarter and up from 4.9% in the first quarter of last year to reach the highest level since at least 2000. Both the quarterly and yearly gains during the first quarter also were the largest jumps seen since that time.
The increase makes Q1 2022 the fifth consecutive quarter in which flips rose compared to the preceding three months. But as deals grew, profit margins sank, falling to their lowest level since 2009, when the market was mired in the aftershocks of the Great Recession.
The median gross profit on a fix-and-flip deal was $67,000, up 5.5% from the $63,500 figure in Q4 2021 but down 4.3% from the $70,000 figure logged in Q1 2021. The return on investment (ROI) for flippers compared to their original acquisition price dipped to only 25.8% during Q1 2022, down 27.3% from the prior quarter and down 38.9% year over year.
“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 Sharga, executive vice president of market intelligence for Attom Data.
“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.”
The first-quarter 2022 return on investment for flippers amounted to less than half of the peak profit margin for flips in this century. That occurred in late 2016 when flipped homes brought a 53.1% ROI.