Fix-and-flip Profits Fell In Q3 2024. Are Investors Leaving The Market?

Fix-and-flip investors took a hit in the third quarter of 2024 as flipped properties accounted for a smaller share of U.S. home sales compared to the previous quarter. Short-term real estate investors saw a 28.7% return on investment (ROI), down from 31.2% in Q2 2024, according to an Attom report released this week.

The Q3 2024 U.S. Home Flipping Report from Attom reviewed sales deed data. The analytics company defined single-family home and condominium flips as “any arms-length transaction that occurred in the quarter where a previous arms-length transaction on the same property had occurred within the last 12 months.”

The report showed that 74,618 single-family homes and condos were flipped from July through September. That represented 7.2% of all U.S. home sales, down 40 basis points (bps) from the prior quarter. Investor profits ramped down during the same time frame and now stand at roughly half of the mid-50% market peak in 2016.

“Home flippers just can’t seem to shake the doldrums. After more than a year when things were getting better, they turned notably worse again over the summer,” Attom CEO Rob Barber said in the report. “One quarter’s worth of numbers isn’t enough to make any grand statements about another downturn. The next six months should speak more to that, especially amid an ongoing tight housing market that should work in their favor.

“But as interest rates remain double what they were a few years ago and inflation keeps raising renovation costs, investors continue to have a tough time making the kind of profits that would lure more into the game.”

Higher renovation costs, mortgage payments, taxes, insurance and utility costs can negatively affect fix-and-flipper profit margins, Attom noted. A separate fix-and-flip report released last month by Kiavi, John Burns Research and Consulting and online marketplace Sundae had similar conclusions. Respondents from that survey cited the same expenses as key stressors swaying their business activities and decisions.

At the metro level, Attom’s report noted that the share of home flips among all sales in Q3 2024 decreased in 62.8% of areas with enough data to analyze.

The five metro areas with the highest shares of flips in the third quarter were Warner Robins, Georgia (22.7%); Macon, Georgia (16.8%); Atlanta (13.6%); Columbus, Georgia (12.8%); and Memphis (12.7%). Meanwhile, the smallest shares were in Seattle (3.5%); Des Moines, Iowa (3.7%); Honolulu (3.8%); Portland, Maine (3.9%); and Madison, Wisconsin (4%).

Fluctuating shares of home flips only tell a portion of the story. Across the 183 metros in the analysis, 57.9% saw profit margins decline from the second to third quarter.

The most significant declines were in Salisbury, Maryland; South Bend, Indiana; Gainesville, Florida; Peoria, Illinois; and Youngstown, Ohio. The report also noted that profit margins averaged less than 30% for nearly half of all surveyed metros. Profit margins only cleared 50% in one-third of these markets in Q3 2024.

Attom also noted that the median resale price for flipped homes was $315,250 in Q3 2024, or $70,250 above the median investor purchase price of $245,000.