Despite all of the attention they receive, home flips have represented a relatively small portion of the real estate market in recent years, with low inventory and high prices dominating the conversation. But home flips have seen some consistent upward movement over the past two quarters, indicating increasing interest in the market, according to the first quarter 2024 Attom U.S. Home Flipping Report.
This past first quarter, 67,817 single-family homes and condominiums were flipped in the U.S., representing 8.7% of home sales. This was an increase over fourth quarter 2023 flips, which represented just 7.7% of sales. Fourth quarter 2023 home flips, however, did show quarter-over-quarter growth, marking two consecutive quarters of growth. Although first quarter 2024 was down from first quarter 2023, when home flips represented 9.8% of the market, the trend appears to be moving in the right direction for investors.
As sales increased in home flips, so did gross profits. According to the report, home flippers nationwide earned an average 30.2% gross profit before expenses on sales made this past first quarter. This margin marked the third time in four quarters that margins increased, a particularly noteworthy trend after a six-year period of largely uninterrupted declines.
Although still well below peaks hit in 2016, these profits represent both quarter-over-quarter and year-over-year increases: Fourth quarter 2023 saw gross profits of 27.7%, and in first quarter 2023, profits hit the nearly 10-year low of just 25.3%. But low inventory and high prices make it unlikely to see a return to the 56.3% gross profit seen in 2016 anytime soon.
Typical flips across the U.S. saw gross profits of $72,375 this past first quarter, up from $65,000 in the fourth quarter, and up nearly $10,000 from 2023’s low point. Fluctuations in home sale prices have also helped home flippers lately, as the typical nationwide resale price on a flipped home increased to $312,375, marking a 4.1% gain over fourth quarter 2023. That gain outpaced the 2.1% increase in median sale price, benefitting investors. Those kinds of gaps appeared annually, as well, as showcased by the quarterly and yearly improvements in returns.
Although nationwide data is helpful to watch trends, local data is still at the heart of the real estate industry. While flips as a percentage of all sales increased in 134 of the 173 metro areas analyzed in the report (77.5 % of the total markets), some areas did see declines, although most of those were by less than two percentage points.
Some areas saw home flips represent a percentage of overall sales that was much larger than the national average of 8.7%. The top five metros with the highest flipping rates this past first quarter were: Warner Robins, Georgia (flips made up 18.7% of all home sales); Macon, Georgia (17.1%); Fayetteville, North Carolina (15.8%); Atlanta (14.7%); and Memphis, Tennessee (14.6%). In addition to Atlanta and Memphis, metro areas with a population of more than 1 million that had above-average flipping rates included Columbus, Ohio (12.8%); Birmingham, Alabama (12.7%); and Kansas City, Missouri (12.1%).
There were several metros with flipping rates well below the national average, however. The smallest home-flipping rates this past first quarter occurred in Honolulu (3.7%); Oxnard, California (west of Los Angeles with a 5.3% rate); Naples, Florida (5.4%); Des Moines, Iowa (5.5%); and Seattle (5.5%).
Areas with the highest percentage of flips as part of overall sales did not see the largest returns, however. The largest returns were seen in lower- priced areas of the Northeast, particularly Pennsylvania. The top five include: Buffalo, New York (127.8% return); Reading, Pennsylvania (124.9%); Pittsburgh (120.6%); Scranton, Pennsylvania (115.7%); and Harrisburg, Pennsylvania (113.6%). On the other side, investors in Texas and Hawaii saw largely disappointing returns. Among metros with a population of least 1 million, the weakest returns on home flips were seen in Austin, Texas (0.3%); Honolulu (1.7%); San Antonio, Texas (2%); Dallas (5.3%); and Houston (8.4%). With the recent cooldown in the housing market boom, some uncertainty still remains for any who invest in the housing market. But clear patterns have emerged over the past year of data, with trends in home flipping on an upward trajectory overall. Savvy investors will want to take a closer look at local data to determine which markets have the best opportunities to make the largest returns on their investments, particularly as interest in home flipping continues to increase.
