Nine percent of all U.S. single-family home and condominium sales transactions in the first quarter of the year were flipped, according to the 2023 U.S. Home Flipping Report published by ATTOM.
That’s down from 9.4% of all home sales in the nation during the first quarter of 2022, but still up from 8% in the last quarter of 2022.
The report revealed that profits and investment returns both increased slightly compared to the previous quarter, but both remained near low points over the past decade. The report shows home flippers may be experiencing ongoing financial struggles.
“Home-flipping investors across the U.S. may have finally halted the decline,” said Rob Barber, CEO of ATTOM. “In the first quarter, profit margins showed a slight upward turn after an extended slump, while interest in flipped homes continued to rise among buyers. However, investors shouldn’t assume they’re out of the woods just yet. Home-flipping carrying costs can easily erase a 22% return on gross profits and it’s possible that the recent gain is merely a temporary blip. Nevertheless, the first-quarter trends offer some hope for investors indicating that brighter times may lie ahead.”
While profit margins were up in 103 of the 172 metros analyzed, 77% of those markets were below levels from the first quarter of 2022.
Two Pennsylvania cities had markets with the largest returns on investment for typical home flips in the first quarter, including Scranton with a 121.9% return and Pittsburgh with a 109.8% return. Philadelphia also saw a 78.8% investment return.
“People from outside of Pennsylvania realize many of our cities offer some of the more affordable options in the country,” said PAR President Al Perry. “Lots of outside investors are investing in Pennsylvania and producing some great rehab properties for potential buyers. That’s one of the reasons why Pennsylvania overall continues to see its median sale price climb.”
Preston Moore, PAR’s president-elect, said, “Pittsburgh’s rents and home prices continue to increase but compared to other major metropolitan areas, Pittsburgh remains one of the best places to live and call home. Pittsburgh has all of the social amenities that someone would find in larger cities.”
“Even though mortgage rates are rising, Pittsburgh is still a great place for investors. Homes are affordable and flippers can buy, rehab, rent and refinance. The dollar amount of real estate investors’ purchases has been declining over the past year due to rising interest rates, which is a phenomenon throughout the country,” he added.
Moore notes the best locations for flipping are lower middle/working class neighborhoods. “The monetizing of the flipping/rental market has put pressure on first-time homebuyers who are trying to purchase a home and has forced many of them to delay their purchases.”