Profit margins are higher for home flips, but there’s a catch
After years of declines, profitable profits are returning. This is evident from a report published this week by Atom, which showed typical profits in the second quarter of 2024 were 30.4%, the fourth time in five quarters that margins have increased.
Attom said flippers have had a tough time in recent years compared to other types of sellers because they have shown an “unusual pattern” of mis-timing the market. The run of profit margins could be a signal that flippers are starting to self-correct.
“The 2024 spring home buying season brought yet another sign of hope for home enthusiasts that the recovery of fortunes that began for them last year was more than just temporary,” Attom CEO Rob Barber said in a statement declaration.
“It’s not like profits are going through the roof and investors are heading into a new wave of good times. On the contrary, because they are still struggling to benefit from the broader market boom. But the figures for the second quarter showed another step in the right direction.”
The report contains some comments. Attom measures the profit margin on residential transactions by subtracting the average purchase price from the average resale price, allowing costs associated with renovations, mortgages and property taxes to eat into the final margin.
The typical margin of 30.4% is down as much as 26 percentage points compared to the 2016 peak. When measured in dollar amounts, gross profit for home flips was approximately $73,500 in the second quarter of 2024, down from a high of $81,000 in 2022, but higher than last year. lowest of $61,000.
The sales prices underline the fight for home fins. Average home prices for single-family homes and condos rose 9% from the previous quarter and rose 6% year-over-year, but flipped home prices rose just 2%.
The share of home sales that were an inflection point fell to 7.5% in the second quarter of 2024 after reaching 8.7% in the first quarter. The share of flips fell in 85.9% of the 185 US metropolitan areas analyzed.
“With the market rising amid a tight supply of homes for sale across the country and falling interest rates, conditions appear ripe for more improvement over the rest of the year, as long as prices don’t rise beyond what most buyers can imagine afford,” says Barber. said.
