Demand uncertainty that has fueled a need for hybrid exit strategies — particularly in higher-inventory, softer-priced markets — dominated the responses of roughly 250 fix-and-flip real estate investors offering first-quarter sector outlooks in a recent survey.

While circumspect in their optimism for the remainder of 2026 as economic fallout from the Iran war threatens to unwind hard-won progress on bringing down inflation, flippers nevertheless reported a second straight quarter of marginally improving market conditions.

Developed by investor-lender Kiavi in partnership with John Burns Research and Consulting, a real estate advisory firm, the Fix and Flip Market Index (FFMI) rose to 63 in the first quarter from 62 in the fourth quarter and 58 a year ago. Measured from 0 to 100, an FFMI score exceeding 50 indicates market expansion.

The fourth quarter of 2025 ended six consecutive quarters of index declines.

“Sales are above average, and pricing conditions are strong in markets with relatively low supply,” noted the report, underscoring an increase to 62 in the component index measuring current sales compared to seasonal norms, from 60 in the fourth quarter and 57 a year ago.

Hovering near index lows of 15% for much of last year, 21% of flippers managed to sell their properties for more than their initial estimate of after-repair value (ARV) in the first quarter, reflecting firmer pricing conditions even as purchase affordability remains constrained. The share of flippers selling for mostly below initial ARV was flat quarterly at 17%.

Up to 37% of respondents reported “good” sales (as opposed to “average” or “poor”) in the first quarter compared to 34% in the fourth quarter and 31% a year ago. Flippers said current sales conditions were stronger in every U.S. region. Florida and Texas were the weakest regions for flipped home sales due to higher new and existing home competition.

As a result, one-third of flippers reported selling completed units for mostly below initial ARV in Texas and 22% reported the same in Florida, compared to 19% in the Southwest and Southern California markets, respectively.

“Flipping activity remains challenged as geopolitical/economic uncertainty and elevated mortgage rates weigh on demand for flipped homes,” the report explained. The FFMI’s remaining two component indexes measure six-month sales expectations and the availability or inventory of “pre-flip homes for purchase.”

The index tracking availability of pre-flip homes for purchase rose to 64 from 63 a year ago, boosted by existing-home inventory that the report says was 5% higher year over year nationwide in the first quarter.

“Flippers remain more active in markets outside the Sun Belt, where housing stock is older and where inventory has not grown as much,” the report explained.

High home prices and mortgage rates since the COVID-19 pandemic have increased acquisition costs for flippers in recent years, eroding profit margins. Softening home prices amid sluggish buyer demand have compounded margin pressure on real estate investors as completed projects sell for less than projected and accrue higher holding costs.

Trump administration tariff and immigration policies have also contributed to higher input costs for flippers, who have seen average renovation costs jump more than 50% since 2022, according to Kiavi and John Burns.

The average renovation cost per flipped home nationwide was $79,000 in the first quarter, up from $75,000 the prior quarter. Renovation costs accounted for 16% of flipped home sales prices in the first quarter, essentially flat from the middle of 2023.

This has sent some flippers running for rentals, at least as a short-term strategy. Despite 44% of flippers reporting expectations for good sales over the next six months — the highest share since the first quarter of 2024 — more flippers expect poor sales, too, the share of which rose from 9% to 13% from the previous quarter.

The share of flippers who reported plans to increase the number of homes they keep as rentals in 2026 rose to 47% in the first quarter from 44% a year ago, with notable geographic concentrations that align with regional pricing expectations for flipped homes.

Nationwide, flippers expect only 0.7% of price appreciation for flipped homes over the next six months, the continuation of a multiyear trend. Flippers had six-month flipped-home price appreciation projections of 2% in the first quarter of 2025 and 3% at the start of 2024.

Two-thirds of Texas flippers expect to hold more completed units as rentals than last year, the most of any region, compared to the lowest share of 24% among Northeast flippers. But Texas flippers expect prices for flipped homes to decline by 1% over the next six months, while flippers in the Northeast expect prices to remain flat.

About 3 in 10 flippers believe that weak demand due to economic uncertainty presents the “largest risk to their business” this year, followed by 20% of respondents who cited limited inventory and too much competition as the greatest risk to their businesses.