Profit margin on flipping a home at 17-year low as prices stay high, Attom finds

LOS ANGELES — It pays less and less to buy and flip a home these days. From April through June, the typical home flipped by an investor yielded a 25.1% return on investment before expenses, the lowest profit margin for such transactions since 2008, according to Attom, a real estate data company. Gross profits — the difference between what an investor paid for a property and what it sold for — fell 13.6% in the second quarter from a year earlier to $65,300, the firm said. Attom's analysis defines a flipped home as a property that sells within 12 months of the last time it sold. Home flippers buy a home, typically with cash, then pay for any repairs or upgrades needed to spruce up the property before putting it back on the market. The shrinking profitability for home flipping is largely due to home prices, which continue to climb nationally, albeit at a slower pace, driving up acquisition costs for investors.

The median price of a home flipped in the second quarter was bought by an investor for $259,700, a record high dating back to 2000, Attom said. The median sales price of flipped homes was $325,000, unchanged from the first quarter, the firm said. A chronic shortage of homes on the market and heightened competition for lower-priced properties are also helping drive up investors’ acquisition costs.

The U.S. housing market has been in a sales slump since early 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years and have remained sluggish this year as mortgage rates, until recently, remained elevated. As home sales have slowed, properties are taking longer to sell. That has led to a higher inventory of homes on the market, benefiting investors and other home shoppers who can pay cash or tap home equity gains.

With many would-be homeowners priced out of the market, real estate investors — whether buying to rent or flip — are taking up a bigger share of U.S. home sales. Some 33% of all homes sold in the second quarter were bought by investors, the highest share in at least five years, BatchData said. Between 2020 and 2023, the share of homes bought by investors averaged 18.5%. All told, investors bought 345,752 homes in the April-June quarter, up 15% from the first quarter but down 12% from a year earlier, the firm said. Investor-owned homes account for roughly 20% of the nation’s 86 million single-family homes, BatchData added.