#United States #Real Estate #ATTOM #Home Flipping #Irvine, CA

Decline in Home Flipping Across the U.S. in 2024

Overview

The latest report from ATTOM, a prominent real estate data firm, indicates a continuing downward trend in the home flipping market throughout the United States for 2024. In a year where many sectors have seen growth, home flipping has struggled significantly, showcasing the complexities faced by investors in the current market.

In 2024, 297,885 single-family homes and condos were flipped, marking a 7.7% decrease from 322,782 flips in 2023, and a staggering 32.4% drop from the peak of nearly 441,000 flips recorded in 2022. This decline reflects not only a reduction in flipping activity but also a downturn in market conditions that have historically favored investors in real estate.

Profit Margins and Investment Returns

Despite the decreasing number of flips, the report reveals a modest increase in gross profits and profit margins. Average gross profits on home flips rose to $72,000 in 2024, an increase from $67,846 in 2023. This generates an impressive 29.6% return on investment, but still pales in comparison to the peaks experienced in prior years.

Historically, the profit margins on home flipping peaked at 54.2% in 2016 but have decreased significantly since. The latest figures indicate that investors are grappling with how to maximize profits effectively amidst challenging conditions including rising mortgage rates and inflated home prices.

As detailed by Rob Barber, CEO of ATTOM, “the home-flipping industry saw investors shy away even more in 2024 amid the extended period of languishing profits.” He notes a critical need for investors to adapt their strategies in this tightening market.

Trends Across the U.S.

The report indicates that home flipping rates have fallen in 68% of U.S. metropolitan areas analyzed. Notable cities reflecting significant declines include:

• - Charlotte, NC: Down 18.5%
• - Jacksonville, FL: Down 16.9%
• - New Orleans, LA: Down 16.4%
• - Denver, CO: Down 15%
• - Miami, FL: Down 13.6%

In contrast, some areas like Cedar Rapids, IA experienced a 49.6% increase in flipping activity, showcasing the uneven landscape investors must navigate.

Cash versus Financing

In 2024, the percentage of flipped homes acquired with financing has slightly decreased to 36.8%, while homes flipped with cash transactions increased to 63.2%. This indicates a trend toward cash purchases as investors are becoming more cautious in a fluctuating market. Cities like San Diego, CA and Seattle, WA showed the highest rates of flips purchased through financing. Meanwhile, cash purchases were notably high in places like Buffalo, NY and Cleveland, OH.

Completion and Sales Rates

Flippers achieved a notable decrease in the average time taken to complete a flip. Homes sold in 2024 took an average of 162 days to complete, down from 169 days in 2023. This efficiency might hint at an effort from investors to quickly capitalize on any opportunities in the market, despite the overall decline in profitability.

Additionally, about 10.7% of homes flipped were sold to buyers using FHA loans, maintaining steady interest from first-time buyers.

Challenges Ahead for Investors

Looking forward, 2024 is filled with uncertainties for home flippers. The combination of a limited housing supply, declining foreclosure rates, and mixed economic forecasts paints a challenging scenario. Investors will need to engage in smart buying practices and efficient renovations to navigate this market successfully.

In conclusion, while there are slight glimmers of hope in rising profits, the overall landscape for home flipping remains complicated and fraught with challenges. Investors must remain vigilant and adaptable to thrive amidst these fluctuations in the U.S. real estate market.