Home Flipping Market: A Mixed Bag in Q2

The home flipping market continues to navigate a complex landscape, with mixed results in the second quarter of 2024. While the number of homes flipped declined compared to the previous quarter, profit margins improved for the fourth time in five quarters. However, challenges persist for investors as market conditions remain volatile.

Flipping Activity and Profit Margins

According to a new ATTOM report, the total number of single-family homes and condominiums flipped in Q2 2024 decreased to 79,540, representing 7.5% of all home sales. This marks a slight decline from the 8.7% rate in Q1 and 7.9% a year earlier.

Despite the decrease in volume, profit margins for home flippers improved. The typical investor earned a gross profit of 30.4% before expenses, slightly higher than the 30.1% in Q1. However, this figure remains below the peak of 48.8% in 2020.

Regional Variations

Profit margins varied significantly across different regions. Some areas, such as Akron, Cape Coral-Fort Myers, Springfield, IL, Gainesville, FL, and Spokane, experienced the biggest gains. Larger cities like Buffalo, Cleveland, Memphis, Tulsa, and Cincinnati also saw notable improvements.

The West, South, and Northeast regions with median resale prices exceeding $400,000 generated the highest raw profits on flipped homes. In contrast, many Southern cities with median resale prices below $300,000, including Tyler, Lubbock, and Killeen, recorded lower raw profits.

Challenges and Opportunities

ATTOM CEO Rob Barber noted that while the second-quarter results show progress, home flippers still face challenges. The market remains volatile, and prices could fluctuate, impacting profitability. The ability to time the market effectively is crucial for success.

The report also highlighted that the average time from purchase to resale increased slightly from 164 days in Q1 to 166 days in Q2. This indicates that holding onto properties for a longer duration might be necessary in some cases.

Financing and Market Dynamics

Cash remained the dominant financing method for home flippers, accounting for 63% of all purchases. FHA-backed buyers made up 11% of flips.

The market dynamics for home flipping continue to evolve. While flipping activity declined in 86% of U.S. metros, certain regions like Georgia and Tennessee experienced higher rates. The ongoing shift in market conditions and the availability of financing options will significantly impact the future of home flipping.

Conclusion

The home flipping market in Q2 2024 presented a mixed picture. While profit margins improved, the number of homes flipped declined. Investors must navigate a volatile market and carefully consider factors such as timing, financing, and regional variations. As the housing market continues to evolve, successful home flippers will need to adapt their strategies and capitalize on emerging opportunities.

Courtesy: Philippa Maister

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