Home Flipping Profits Slide to Their Weakest in Years — What That Means for Investors and Builders

Margins Narrow as Flipping Fever Cools, ATTOM Finds

Home flipping — buying a house, fixing it up and selling it quickly — has just become a tougher business. ATTOM, the property data company, reported that the median gross profit on flipped homes dropped to roughly $60,000 and the median return on investment slid to about 23.1% — below 25% for the first time since the housing turmoil of 2008. The company’s numbers show both quarterly and year-over-year deterioration, and a clear shift from the boom years after the pandemic.

For investors, builders and lenders who had counted on outsized margins in the flip market, the headline is simple: profits are thinner and risk is rising. That changes how the business looks for mom-and-pop flippers, big private-equity operators and companies that lend or supply materials to the trade.

Snapshot: What ATTOM Measured

ATTOM’s release centers on a few core metrics that matter to anyone tracking flips. The median gross profit — the simple difference between what a property sold for after renovation and what it was bought for — sits at about $60,000. The median raw return on investment, which ATTOM reports before subtracting renovation, carrying and tax expenses, fell to roughly 23.1%.

The firm also flagged a pullback in flip volume after the pandemic-era peak: fewer homes are being turned over quickly than a year or two ago, and the pace has weakened on a quarterly basis. ATTOM’s regional breakdown shows that while some markets still deliver healthy gross profits, many metros that led the boom have cooled or reversed.

Why Returns Compressed: Costs, Rates and Cooling Prices

There are three basic forces pinching margins.

First, costs. Renovation budgets have been stretched by higher prices for materials and for labor. Even where materials have softened from their pandemic highs, local contractor availability and wages remain elevated in many markets. That raises the out-of-pocket bill flippers must absorb before they resell.

Second, higher interest rates. Borrowing is more expensive for purchase money, interim loans and carry during renovations. When a project takes longer than expected, carrying costs — interest, taxes and insurance — can erode a deal quickly. That matters most for small operators who depend on short holding times and tight budgets.

Third, home-price momentum has slowed. After two strong years of house-price gains in many metros, appreciation has cooled in a number of places. A weaker resale environment means you can’t rely on quick, outsized price jumps to cover aggressive acquisition or renovation spending.

Put together, these shifts squeeze the spread between purchase and resale. ATTOM makes clear this is not one-off: it’s a market-wide recalibration where narrower margins are now the norm rather than the exception.

What Investors Should Watch: Margins, Credit and Exposure Risks

For investors, the practical takeaway is straightforward: flipping is less of a home-run business and more of a margin-sensitive one. That has concrete implications across the capital chain.

– Small flippers: The lowest-margin deals are now the most dangerous. Individual operators who relied on cheap acquisition and fast resales are exposed to small delays or extra repair costs that can wipe out profit.

– Institutional players and private equity: Larger firms with scale can manage costs and spread risk, but their returns will also shrink unless they push harder on sourcing discount inventory or cut costs in rehab. Some may shift to adjacent strategies — bulk acquisitions for rental conversions or ground-up infill development — where control over product can protect margin.

– Lenders and specialty finance: Firms that underwrite fix-and-flip loans will need to reprice risk. Expect tighter credit for smaller operators, higher loss reserves and possible upward pressure on rates for short-term rehab loans.

– Construction and materials suppliers: Demand composition may shift toward lower-end renovations if investors pull back from pricey cosmetic upgrades. That could pressure margins for premium material suppliers while benefiting value-oriented manufacturers.

– REITs and housing-focused funds: Real estate companies with exposure to quick-turn strategies will see returns normalized. Those that depend on steady rental cash flow are less affected, but any loans or JV deals tied to flips ought to be reexamined for underwriting assumptions.

Near-term trade catalysts to watch: changes in mortgage rates, signs of renewed home-price appreciation or a fall in renovation input costs. Track indicators such as average hold time for flips, seasonality in flip listings, and default rates on rehab loans for early warning of further stress.

Where Flips Still Pay Off — Regional Winners and Losers

Even with national compression, the landscape is uneven. ATTOM’s release points to pockets where flipping remains comparatively attractive, and others where it has become marginal or loss-making.

Markets with a mix of steady demand, lower entry prices and constrained supply tend to still yield better gross profits. In contrast, metros that saw the fastest pandemic gains now face the biggest pullbacks because buyers are more selective and sellers are taking longer to adjust prices.

Two practical rules hold: lower-cost, high-demand neighborhoods still work if you control renovation costs and speed; high-priced coastal or overheated suburban segments are the riskiest because they need stronger price rebounds to make flips profitable. Local dynamics — employment trends, new construction pipeline, and absentee-owner activity — determine whether a metro is a winner or a loser.

Data Notes: How ATTOM Counts Flips and What It Leaves Out

ATTOM defines a flip as a home bought and then resold within a short window (usually about 12 months). Its headline profit figures are gross profits: the simple gap between purchase price and resale price. That makes them useful for tracking market momentum, but they are not net profits. ATTOM’s numbers typically do not subtract renovation costs, holding costs, broker fees, taxes or capital improvements in full — items that can materially cut returns.

For investors, that distinction is crucial. A 23% gross return can become a single-digit net return after renovations and carry. Follow-up data to monitor includes ATTOM’s monthly flip reports, mortgage-rate moves, local permitting trends, building material price indices and rehab-loan performance metrics.

The flip business has shifted from a high-margin trade to one where discipline matters more than ever. For investors and builders, the path to decent returns now runs through careful sourcing, strict cost control and an eye on holding costs — not counting on quick market rallies to bail out marginal deals.

Sources

• prnewswire.com