Nationally, the rate of home and condo flips hit a new high in the first quarter of the year, even as profits fell to new lows. According to ATTOM, a real estate data company, 9.6 percent of all home sales in the first quarter of 2022 were flips—the highest level since at least 2000.
Q1’s total was up from 6.9 percent, or one in every 14 home sales, during the fourth quarter of 2021, and from 4.9 percent, or one in 20 sales, in the first quarter of last year.
But the report also shows that raw profits on those deals remained below where they were a year ago. Among all flips nationwide, the gross profit on typical transactions was $67,000 in Q1. While up from 5.5 percent or $63,500 in the fourth quarter of 2021, it was 4.3 percent less than the $70,000 level recorded in the first quarter of 2021.
Profit margins fell for the sixth quarter in a row, as the typical gross-flipping profit of $67,000 in the first quarter of 2022 translated into just a 25.8 percent return on investment compared to the original acquisition price, according to ATTOM.
“The good news for fix-and-flip investors is that demand remains strong from prospective homebuyers, as evidenced by this quarter’s report, which shows that one of every 10 homes sold during Q1 was a flip,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “The bad news is that rising mortgage interest rates are beginning to slow down home price appreciation rates, and buyers have become more selective – and less willing to outbid other buyers for properties they’re interested in. This is having a predictable impact on profit margins for investors.”
The latest return on investment also was less than half the peak of 53.1 percent for this century, which hit in late 2016. Additionally, the median price of homes flipped in Q1 increased to another all-time high of $327,000. That was up 10.5 percent from $296,000 in the fourth quarter of 2021 and 30.8 percent from $250,000 a year earlier.
The largest flip rates during the first quarter of 2022 were in Phoenix (18.7 percent of all home sales); Charlotte (18 percent); Tucson (16.2 percent); Atlanta (16.1 percent) and Jacksonville (16 percent).