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

Home Flipping Profits Decline: Understanding the Current Dynamics

In the first quarter of 2025, the American real estate market has shown notable shifts, particularly in the realm of home flipping. According to ATTOM, a prominent provider of property data and real estate analytics, the latest Home Flipping Report points towards a decline in profits for home flippers, marking a significant change from previous trends.

Overview of Home Flipping Numbers

As of early 2025, a total of 67,394 homes and condominiums were flipped in the United States. While this number indicates a slight rise in flips as a percentage of all home sales (from 7.4% to 8.3%), it represents a decrease from the 8.7% share recorded during the same period last year. The report highlights a slowing market for prospective home flippers, with the overall number of flips being the lowest since 2018.

Flipping profits have also taken a hit. A typical flipped property yielded a 25% return on investment (ROI) in Q1 2025, down from 28% the previous quarter and significantly less than the 48.8% high noted in late 2020. The gross profits from these flips have also declined, with the report revealing a drop to $65,000 from $70,000 in the previous quarter.

The Market Dynamics Affecting Home Flipping

Rob Barber, CEO of ATTOM, provided insights on the current market conditions. He noted that while high home prices can benefit short-term investors on the selling end, they complicate matters for buyers searching for under-priced homes, thereby squeezing profit margins. This dynamic is particularly evident as investors navigate high prices without the assurance that they won't decrease before sale.

The data suggests that two-thirds of America’s metropolitan areas are experiencing a reduced share of home flips relative to last year. Among the 173 metropolitan statistical areas assessed, there was a quarter-over-quarter increase in flips in 76.3% of these markets, but a year-over-year decrease in 115 areas.

Regional Insights and Profit Margins

Notably, the highest concentration of home flips as a proportion of total sales was found in places like Macon, GA (21%), Warner-Robins, GA (20.6%), and Atlanta, GA (15.9%). In contrast, areas like Honolulu, HI (4.7%) and New Orleans, LA (4.9%) exhibited some of the lowest flipping percentages.

The most significant drops in profit margins occurred in Spartanburg, SC, and Ocala, FL, where ROI plummeted from over 100% to around 31%. This trend continues as many investors find that metropolitan areas with populations over one million are grappling with declining profit margins.

Cost Factors and Cash Purchases

When examining the cost of homes flipped, it is evident that properties purchased for less than $225,000 delivered the most favorable profit margins, averaging around 46.4% ROI. Conversely, homes costing over $400,000 yielded a much lower return of 19%.

Interestingly, 62.2% of homes flipped in Q1 were bought entirely with cash, a slight decrease from the previous quarter but consistent with last year’s figures. This trend underscores the competitive nature of the market where cash buyers have an advantage, particularly in lower-end markets.

Increasing Average Flip Time and Future Outlook

The average duration for completing a flip has also increased, with properties taking 164 days from purchase to sale, compared to 157 days in the last quarter of 2024. This is an improvement from 178 days seen mid-2023, showing some signs of stability.

As we analyze the market's current landscape, it becomes crucial for investors to adapt strategies that account for these evolving trends. Despite challenges, certain regions still present lucrative opportunities for home flipping.

The insights provided by ATTOM serve as a valuable resource for investors and stakeholders alike, allowing them to make informed decisions in an ever-changing marketplace. As we continue to monitor these shifts, it’s clear that understanding local market conditions will be key to succeeding in home flipping amidst fluctuating profits.