Investor Profits Hit New Lows As Fix-And-Flip Margins Shrink Nationwide: 'The Next Six Months Will Speak More'

Fix-and-flip investors face shrinking returns as profit margins dropped to 28.7% in the third quarter, down from 31.2% in Q2. This marks a sharp decline from peak returns above 50% in 2016, according to new data from ATTOM.

The slowdown appears widespread, with 63% of analyzed metro areas showing decreased flip activity. Only 74,618 single-family homes and condos were flipped between July and September, representing 7.2% of all home sales – a 40 basis point decline from the previous quarter.

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“Home flippers just can’t seem to shake the doldrums,” ATTOM CEO Rob Barber said in a statement cited by HousingWire. “After more than a year when things were getting better, they turned notably worse again over the summer.”

Georgia markets dominate the remaining active flipping scenes, with Warner Robins leading at 22.7% of sales, followed by Macon at 16.8% and Atlanta at 13.6%. Meanwhile, Seattle reported the nation’s lowest flip rate at 3.5%, followed by Des Moines at 3.7% and Honolulu at 3.8%.

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Rising costs across multiple fronts squeeze investor margins. Higher renovation expenses combine with increased mortgage payments, taxes, insurance and utilities to pressure returns. The median resale price for flipped homes reached $315,250 in Q3, providing a typical gross profit of $70,250 above the median purchase price of $245,000.

Nearly half surveyed metro areas now show profit margins below 30%, with only one-third of markets maintaining margins above 50%. The steepest declines hit Salisbury, Maryland; South Bend, Indiana; and Gainesville, Florida.

Cash purchases dominate the remaining transactions, with 62.9% of flips funded without financing – a slight increase from Q2’s 62.3%. Detroit leads major metros in cash purchases at 79.7%, followed by Cleveland at 76.5%.

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“The next six months should speak more to that, especially amid an ongoing tight housing market that should work in their favor,” Barber said. “But as interest rates remain double what they were a few years ago and inflation keeps raising renovation costs, investors continue to have a tough time making the kind of profits that would lure more into the game.”

Sales to FHA buyers, typically first-time homeowners, dropped for the first time in over a year to 10.1% of flipped properties, down from 11.8% in Q2. Bakersfield, California leads major markets in FHA flip sales at 27.7%, followed by nearby Visalia at 27.4%.

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