Yahoo Finance From Flip To Flop: Home Flipping Takes a Dive, Marking Fastest Decline In 15 Years
Once considered a lucrative investment strategy, home flipping has seen a significant decline in viability, plummeting at its fastest pace in 15 years.
Factors such as rising property prices, increased competition and a tightening housing market have contributed to this decline. What was once a popular way to generate quick profits in real estate is now more challenging, requiring more capital, expertise and patience to turn a profit.
Real estate data provider ATTOM's 2023 U.S. Home Flipping report shows that 308,922 single-family homes and condos in the United States were flipped in 2023. That was down 29.3% from 436,807 in 2022 — the largest annual decline since 2008.
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As the number of homes investors flipped dropped, so did flips as a portion of all home sales. They dropped from 8.6% of all sales in 2022 to 89.1% last year, according to the report.
"In 2023, the landscape for home flipping across the U.S. became increasingly challenging," ATTOM CEO Rob Barber said. "Whether the overall market has soared or seen just modest gains in recent years, investors have missed out on the action."
In 2023, gross profits from typical home flips nationwide declined to $66,000, representing the difference between the median sales price and the initial investment made by investors. This marked a decrease from $70,100 in 2022, resulting in a 27.5% return on investment (ROI) compared to the original acquisition price. The latest nationwide ROI, before factoring in mortgage interest, property taxes, renovation expenses and other holding costs, reached its lowest level since 2007, dropping from 28.1% in 2022 and 35.7% in 2021.
Home flips as a portion of all house sales dropped in 53% of the metropolitan statistical areas (MSAs) ATTOM analyzed, with the biggest declines occurring in the South and the West. Gainesville, Georgia, saw the biggest decline, dropping from 15.1% in 2022 to 9.9% last year. It was followed by Phoenix, down from 16.3% to 11.9% in the same period; Prescott, Arizona, down from 9.8% to 6%; Charlotte, North Carolina, down from 14.2% to 10.6%; and Provo, Utah, down from 10.9% to 7.5%.
Metro areas that saw an increase in home flipping rates were Macon, Georgia; Gulfport, Mississippi; Jackson, Mississippi; Columbus, Georgia; and Dayton, Ohio.
"The sharp decline in the number of home flips likely reflected a combination of a tight supply of homes for sale as well as dwindling returns," Barber said. "Either way, it will take some significant reworking of the financials for home flipping fortunes to turn back around."
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