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Home Flipping Increases, Even as Profits Decline

By ATTOM Data Solutions

Home flipping activity is at its highest point since 2006. The number of homes flipped grew by 26% in 2021 compared to 2020, according to a new report from ATTOM Data Solutions, a real estate research company. Last year’s flips comprise 5.5% of all home sales in the nation during 2021. Home flips are considered transactions that consist of buying and selling properties within 12 months.

Home flippers have been trying to cash in on rapidly rising home prices. However, even as flipping has increased, gross profit margins have not. In fact, gross profit margins on home flips in 2021 decreased to their lowest level in more than a decade, according to the ATTOM Data Solutions report.

Homes flipped in 2021 typically generated a gross profit of $65,000 nationwide, the difference between the median sales price and the median amount investors originally paid. At the current rate, the gross profit translates to a 31% return on investment compared to the original acquisition price, which is the lowest margin since 2008, according to researchers.

“While gross profits were lower for fix-and-flip investors in 2021, there may have been offsets that protected net profits,” says Rick Sharga, ATTOM’s executive vice president of market intelligence. “Fewer flippers financed their purchases, so their cost of capital was lower. And it took less time to execute a flip, reducing holding costs, and suggesting that less extensive—and less expensive—repairs were needed to bring the properties to the market. A lot of the mark-up on fix-and-flip properties historically has come from the value of those repairs, but so have a lot of the costs that reduce net profits.”

The typical gross profits on home flips declined in 2021 after hitting a 15-year high in 2020, according to the report. Homes flipped in 2021 sold for a median price nationwide of $275,000. The average home flipper sold a home last year in 153 days, the lowest number since 2012.

Home flipping rates as a portion of all home sales dropped in slightly more than half of the 209 metro markets tracked by ATTOM Data Solutions. The largest drops were reported in the Northeast and West, led by Honolulu (down 83%); Atlantic City, N.J. (down 73%); Manchester, N.H. (down 57.7%); Rochester, N.Y. (down 48%); and Cedar Rapids, Iowa (down 47.8%).