Rick Gomez/Getty Images
- Nearly 115,000 houses and condos were "flipped" in the first quarter of 2022, Attom reports.
- The number represents nearly one in ten of all houses sold — the highest level since at least 2000.
- Meanwhile, rising prices are squeezing margins to the lowest level since the Great Recession in 2009.
House flippers have been busier than ever lately.
In the first quarter of 2022, nearly 115,000 condos and single-family homes were sold after having been bought within the preceding 12 months, a measure property data firm Attom uses to represent the fix-and-flip business.
"The good news for fix-and-flip investors is that demand remains strong from prospective homebuyers, as evidenced by this quarter's report," Attom's executive vice president of market intelligence, Rick Sharga, said in a statement.
The number of flips represents one out of every ten houses sold in the quarter, a record high going back to at least 2000, when Attom's data series begins. The previous peak was in 2006, just ahead of the housing crash that kicked off the Great Recession.
At the same time, rising home prices are making it more expensive and less profitable to be a flipper.
The median price for pre-flip homes reached an all-time high of $327,000, up more than 30% from the same period the year before. Post-flip home prices aren't increasing as quickly, causing gross profits (the difference in before and after sale prices) to shrink from $70,000 in 2021 to $67,000 in 2022.
Those gross profits shrink further when factoring in the costs of repairs and upgrades, which Attom says industry experts estimate at between 20% to 33% of the property's final sale value. A typical flip takes a little more than five months to complete, which is slower than 2021, but in line with longer-term trends.
The major cities with the highest rates of flipping were Atlanta, Jacksonville, Charlotte, and Tuscon, with Phoenix leading the pack at nearly one flip out of every five home sales.
By contrast, the lowest flip rates were in Olympia, WA, Portland, ME, Salem, OR, Syracuse, NY, and Davenport, IA — all with flips representing less than 5% of total sales.
Lastly, Sharga said rising borrowing costs are likely to cool the market and thin out the one third of flippers who use financing to complete their projects.
"Cash buyers should be in an even greater position of competitive advantage in the fix-and-flip market," Sharga said. "It will be interesting to see if the percentage of cash purchases, and purchases made by larger, better capitalized investors, increases over the next few quarters."
The increase also follows a trend of major private-equity funds and other big-time investors jumping into what had been a small-time pursuit, especially in sunbelt states like Arizona, Georgia, and North Carolina. So-called iBuyers like Opendoor, Zillow Offers and Offerpad bought more than 70,000 homes in 2021, according Zillow.
Their involvement is helping push up home prices out of reach for some smaller real-estate players, and making the homes more expensive for eventual buyers or renters once they're fixed and flipped.
Are you a home-flipper with a story to share? Contact the reporter at dreuter@insider.com
source https://www.businessinsider.com/flipped-home-sales-hit-22-year-high-prices-shrink-profits-2022-6