House flipping: Monkey dust or profits in 2023?

___

Published Date 3/28/2024

They say what goes up must come down. Buying, rehabbing, and reselling homes for a sizable and fast profit is not the boon it once was, even though it’s still happening in some major U.S. metro areas.

According to Realtor.com’s Nancy Ruhling using ATTOM real estate data, the number of single-family homes and condos flipped in 2023 dropped 29.3% from 2022, to 308,922, the largest decline in 15 years. Even gross profits plummeted to $66,000 — only a 27.5% return on investment, the lowest level since 2007. Flipped properties sold for a median of $306,000 last year. And that doesn’t include the cost of all the work the flippers put into the property to get it ready for sale.

“The profit margin stands at less than half of what traditional sellers commonly got last year,” says ATTOM CEO Rob Barber. “A return that low also could easily be wiped out by renovation, mortgage, property tax, and other carrying charges investors must pay between purchase and resale.”

ATTOM’s findings, culled from sales deed data, reflect single-family homes and condos that were sold in arm’s-length transactions twice within 12 months — indicators of a flip.

The greatest declines were in the South and the West. Leading that list is the Gainesville, GA, metro area, where the rate went down from 15.1% in 2022 to 9.9% in 2023. It was followed by Phoenix, where the rate decreased from 16.3% to 11.9%; Prescott, AZ, down from 9.8% to 6%; Charlotte, NC, down from 14.2% to 10.6%; and Provo, UT, down from 10.9% to 7.5%. Other frequent flipper locales that topped the list were Macon, GA, Jackson, MS, Columbus GA, and Dayton OH.

As for the smallest nuggets earned by flipping, Texas led the way, as it was home to four of the five (large) metro areas with the smallest profits. If you think about it, some of these profits were barely enough to add paint, replace a few tiles, and freshen up a listing and others may have produced a negative investment.

Austin’s gross flipping profit in 2023 was $18,640
San Antonio saw only $12,289
Dallas was worse at $14,816
Houston came in at $16,932
And Phoenix, AZ had a gross flipping profit of $25,000

There are, however, still five metros in which flippers can profit. With higher prices come higher profits. Here are the median amounts flippers in these areas made in 2023. (Only metros with at least 1 million residents were included, and the profits do not subtract the amount investors spent on labor, materials, and other costs.)

San Jose, CA had a gross flipping profit of $275,250
San Francisco’s was $170,000
Boston flipper made an average of $158,000
New York City, just a tad less at $154,750
And sunny San Diego’s gross flipping profit was $153,000

Realtor, TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.