Fix and Flip Trends in 2023 in the United States

In the third quarter of 2023, the trend of home flipping in the United States continued to evolve as the number of flipped properties decreased while profits for investors increased. This period saw single-family homes and condominiums being flipped which was about 7.2% of all home sales.

Despite a reduction in flipping activity, the financial outcomes for investors improved. The average profit margin on flips rose to 29.8%, a significant increase from previous periods. This profit was calculated from the difference between the median purchase price and the resale price of flipped homes. According to ATTOM, the median resale price was $305,000, while the purchase price was typically $235,000, yielding an average profit of $70,000 per property.

The geographical distribution of flipping varied, with the highest activities reported in the South and certain metro areas like Macon, GA, and Salisbury, MD. Conversely, cities like Seattle, WA, and Madison, WI saw some of the lowest flipping rates. The variance in flipping activity across different regions illustrates the diverse nature of the real estate market in the U.S.

Interestingly, the method of purchasing these properties shifted slightly. About 62.9% of all homes flipped in this quarter were bought with cash, a marginal increase from the second quarter of 2023. This suggests that as mortgage rates increased, more investors opted to buy properties outright rather than financing them with fix and flip loans.

Another notable trend was the efficiency in the flipping process. The average time taken to flip a house reduced to 161 days, which is the quickest turnaround since late 2021. This increase in efficiency could indicate that investors are optimizing their operations to maximize profits amidst changing market conditions.

However, there was a drop in homes flipped to FHA buyers, who are typically first-time homeowners. Only 10.1% of flipped homes were sold to FHA-backed buyers, a decrease from the previous quarter, indicating a shift in the buyer demographic or possibly in the types of properties being flipped.

The report by ATTOM indicates that while the home flipping market is seeing fewer transactions, the profitability of these ventures is improving. This could suggest a more selective approach by investors, focusing on properties with higher potential returns despite the overall market slowdown. This strategic shift could be a response to the broader economic conditions affecting the real estate market, including fluctuating interest rates and regional economic shifts.

Overall, the third quarter of 2023 showed that the home flipping industry is adapting to the changing economic landscape, with investors finding ways to maintain and even increase their profits despite fewer transactions.