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HOME FLIPPING REMAINS UP IN 2022 ACROSS U.S. BUT GROSS PROFITS FALL TO ANOTHER LOWNumber of Home Flips Hits Highest Level in More Than 15 Years;
IRVINE, Calif., March 23, 2023 /PRNewswire/ -- ATTOM, a leading curator of land, property, and real estate data, today released its year-end 2022 U.S. Home Flipping Report, which shows that 407,417 single-family homes and condos in the United States were flipped in 2022. That was up 14 percent from 357,666 in 2021, and up 58 percent from 2020, to the highest point since at least 2005. The report reveals that the number of homes flipped by investors last year represented 8.4 percent of all home sales, also the largest figure since at least 2005. The latest portion was up from 5.9 percent in 2021 and 5.8 percent in 2020. But even as quick buy-renovate-and-resell turnarounds by investors shot up, gross profit margins on home flips in 2022 sank to their lowest level since 2008 following the second major drop in two years. Homes flipped in 2022 typically generated a gross profit of $67,900 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was down 3 percent from $70,000 in 2021 and translated into just a 26.9 percent return on investment compared to the original acquisition price. The latest nationwide ROI (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was down from 32.6 percent in 2021 and from 41.9 percent in 2020. U.S. Home Flipping Gross Profits & Returns Chart Investors saw their profit margins drop for the fifth time in the past six years as the median value of the homes they flipped rose more slowly than the median price they paid to purchase properties – 12 percent versus 17 percent. The decline in home-flipping profits in 2022 continued to cast a negative light on a niche of the U.S. housing market that is growing but also struggling to figure out how to profit from changing price trends. The latest drop-off came during a year when the nation's decade-long home-price runup began to stall, leading to the weakest annual gains in three years and even a decline in the second half of 2022. That happened as rising home-mortgage rates, consumer price inflation and other forces cut into what home seekers could afford, reducing demand and cutting into prices investors were able to get on resale. But profits for home flippers had begun diminishing in 2017 even as the broader housing market was booming. "Last Year, home flippers throughout the U.S. experienced another tough period as returns took yet another hit. For the second straight year, more investors were flipping but found no simple path to quick profits," said Rob Barber, chief executive officer at ATTOM. "Indeed, returns are now at the point where they could easily be wiped out by the carrying costs during the renovation and repair process, which usually accounts for 20 to 33 percent of the resale price. This year will reveal more about whether investors decide to find different ways to profit from home-flipping or take a step back and wait for conditions to get better." Home flipping rates up in almost all housing markets, with biggest increases in South and West Aside from Honolulu, the biggest increases in flipping rates in 2022 in metro areas with a population of 1 million or more were in Sacramento, CA (rate up 116.4 percent); Atlanta, GA (up 94.3 percent); Minneapolis, MN (up 72.8 percent) and Orlando, FL (up 72.2 percent). The only metro areas where home flipping rates decreased from 2021 to 2022 were New Orleans, LA (rate down 8.2 percent) and Green Bay WI (down 2.9 percent). Home flips purchased with cash financing decrease again while all-cash transactions go up U.S. Home Flipping Financing Trends Chart Meanwhile, 64.8 percent of homes flipped in 2022 were bought with all-cash, up from 64.1 percent in 2021 and from 59 percent two years earlier. Among metropolitan areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flipped homes purchased by investors with financing in 2022, included Boston, MA (53.7 percent); San Diego, CA (51 percent); Seattle, WA (50.8 percent); Providence, RI (50.5 percent) and San Jose, CA (50.1 percent). In that same group, the metro areas with the highest percentage of flips purchased with all cash included Detroit, MI (84.7 percent); Atlanta, GA (80.7 percent); Buffalo, NY (80.6 percent); Indianapolis, IN (77.4 percent) and Cleveland, OH (77.1 percent). Typical gross profits on home flips decline in half the nation 2022 Gross Flipping ROI by Price Range Chart Among the 56 metro areas in the U.S. with a population of 1 million or more, those with the largest gross flipping profits in 2022 were San Jose, CA ($242,625); San Francisco, CA ($163,000); Washington, DC ($146,728); New York, NY (141,332) and Seattle, WA ($137,664). The lowest gross flipping profits among metro areas with a population of at least 1 million in 2022 were in Kansas City, MO ($26,963); San Antonio, TX ($29,000); Houston, TX ($29,901); Indianapolis, IN ($34,532) and Dallas, TX ($36,970). Home flipping returns drop in three-quarters of U.S., hitting lowest nationwide level in over 15 years Margins fell last year as the median nationwide resale price on flipped homes increased just 12.3 percent, from $285,000 in 2021 to $320,000 in 2022. That was less than the 17.3 percent increase in the price investors were paying when they bought homes (from $215,000 to $252,100). The typical home-flipping investment return decreased from 2021 to 2022 in 168, or 77 percent, of the 218 metro areas analyzed. Among metro areas with a population of 1 million or more, the biggest percentage-point decreases in profit margins during 2022 were in Rochester, NY (ROI down from 100.4 percent in 2021 to 55.6 percent in 2022); Oklahoma City, OK (down from 63.6 percent to 35.1 percent); Philadelphia, PA (down from 106.3 percent to 78 percent); Richmond, VA (down from 91.4 percent to 68.6 percent) and Washington, D.C. (down from 61 percent to 42.7 percent). In that same group of markets with populations of at least 1 million, the largest increases in returns on investment on the typical home flips were in Cleveland, OH (ROI up from 26.8 percent in 2021 to 41.4 percent in 2022); New Orleans, LA (up from 54.1 percent to 64.6 percent); Cincinnati, OH (up from 38.4 percent to 47.4 percent); Honolulu, HI (up from 5.7 percent to 7.4 percent) and Orlando, FL (up from 17.6 percent to 18.7 percent). Among metro areas with a population of at least 1 million, the biggest gross profit margins in 2022 were in Pittsburgh, PA (114.2 percent); Buffalo, NY (90.7 percent); Philadelphia, PA (78 percent); Baltimore, MD (72.9 percent) and Richmond, VA (68.6 percent). The smallest were in Honolulu, HI (7.4 percent); Austin, TX (8.2 percent); Sacramento, CA (9.4 percent); Phoenix, AZ (10.6 percent) and Houston, TX (11.3 percent). Average days to flip nationwide increases Average Days to Flip By Year Chart Percent of flipped homes sold to FHA buyers ticks back up Among the 218 metro areas with a population of at least 200,000 and at least 100 home flips in 2022, those with the highest percentage of flipped homes sold in 2022 to FHA buyers — typically first-time homebuyers — were Merced, CA (25.6 percent); Visalia, CA (24.6 percent); Springfield, MA (22.2 percent); Laredo, TX (21.9 percent) and Modesto, CA (20.6 percent). More than 200 counties had a home flipping rate of at least 10 percent in 2022 "While declining margin is certainly a cause for caution, it is important to remember that these numbers are somewhat backward looking in that they reflect dispositions of properties that were acquired in 2021 or early 2022 amidst the Covid-induced bidding wars in many locales", said Maksim Stavinsky, Co-Founder and President of Roc360. "On the other hand, it is encouraging that investors were able to clear in excess of four hundred thousand properties – the most ever – in an environment of rising interest rates, without a meaningful increase in project timelines." Roc360 last week announced the closing of its asset acquisition of Finance of America Commercial, a business purpose loan originator, so it is continuing to bet on growth in the space. High-level takeaways from fourth-quarter 2022 data:
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