Home flipping by investors declined in 2024 as margins improved but remained below the levels seen during most of the past decade.
While an average return of 29.6% over a relatively short time span would seen tantalizing to investors in many asset classes, it was a long way from the 54.2% peak of 2016, and even as it improved on the averages of 2023 and 2022, the share of all home sales in the US that were flipped (7.6%) declined by almost 8% year-over-year and more than 32% from 2022.
The ROI on median-priced home flips nationwide has dropped 16 percentage points since 2020 and is off by 25 points since the highwater mark over the past decade.
The stats are from property analytics firm ATTOM, which revealed that the gross profit on a typical buy-renovate-and-resell project last year was $72K nationwide, up from just shy of $68K in 2023.
"The home-flipping industry saw investors shy away even more in 2024 amid the extended period of languishing profits. But even as activity waned, there was at least a glimmer of hope that returns were starting to turn around," said Rob Barber, CEO at ATTOM. "While home flippers still seemed to be having difficulty timing the market for big profits, their margins at least stopped going in the wrong direction."
Two thirds of US metropolitan statistical areas saw a reduction in home flipping last year with the biggest decreases in the South and West.
2025 outlook
With the first quarter of 2025 almost done, Barber says navigating the market won’t be easy for investors.
"This year poses significant uncertainty for investors, what with a short supply of homes for sale, declining numbers of low-priced foreclosure properties, mixed economic forecasts and elevated mortgage rates. So, they will have to do some very smart buying and quick renovating to keep the profit rebound going."
New data from the National Association of Realtors shows that home price growth is still accelerating.
Existing-home sales advanced 4.2% in February and the median existing-home sales price rose 3.8% year-over-year to $398,400, the 20th consecutive month of year-over-year price increases.
While price rises could make it harder for investors to enter the market and drive margins higher, they are certainly good news for existing homeowners, especially given a rise in the number of homes in negative equity reported at the end of last year.
"Each one percentage point gain in home price translates into an approximately $350 billion increase in housing equity for American property owners," said NAR Chief Economist Lawrence Yun. "That means a gain of nearly $1.3 trillion in home value appreciation at a time when the current stock market is undergoing a correction. Moreover, the ongoing housing shortage, coupled with historically low mortgage default rates, implies a solid foundation for home values."
Read more at InvestmentNews
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