Profit margins on fixer-uppers fall to 10-year low

Housing market’s slowing growth to blame for home flippers

National /
Sep.September 17, 2021 01:30 PM
The slowing of the housing market has squeezed the profit margins of house-flipping investors. (iStock)

The slowing of the housing market has squeezed the profit margins of house-flipping investors. (iStock)

The hot housing market made it a boon to flip homes. But with buyers beginning to ease up, and sellers of even dilapidated homes demanding top dollar, investors in fixer-uppers are seeing profit margins sink.

Their return on investment the second quarter came in at less than 34 percent of the original home price, according to a study by Attom Data Solutions. It’s the lowest profit margin for home flips since 2011, Inman reported.

The return on investment dropped almost 4 percentage points from the first quarter. It also dropped 7 percentage points from the second quarter of 2020, the first full quarter of the pandemic.

The reason behind the slipping profit margins is the stabilization of the housing market, which had surged in the first year of the pandemic. Although housing prices are still growing, they are no longer climbing at such a rapid rate.

The median price of a flipped home sold in the second quarter was up 11 percent from the first quarter and 19 percent year-over-year. When the same flipped homes were bought, the median price was up almost 14 percent from the previous quarter and 25 percent year-over-year.

Another factor in the profit-margin drop may be that the percentage of homes being sold as flips increased from the first quarter, meaning fewer flips are low-hanging fruit. Home flip sales made up 4.9 percent of all sales in the second quarter, a rise from 3.5 percent the previous quarter, when home flips were at a two-decade low.

Investors are increasingly looking at fixer-uppers, hoping to turn a quick buck on a property that typically produced an 8 to 12 percent yield. But the supply of fixer-uppers available has been hampered by the rise in home prices, cutting off a pipeline of homes that usually become available for investors after they are foreclosed on.

[Inman] — Holden Walter-Warner






    Related Articles

    arrow_forward_ios
    9408 Bay Drive
    Waterfront Surfside home that set record in January flips for 20% gain
    Waterfront Surfside home that set record in January flips for 20% gain
    AIMCO founder Terry Considine and a rendering of the Grand Flamingo tower
    Miami Beach board rejects Aimco’s proposal for Grand Flamingo tower
    Miami Beach board rejects Aimco’s proposal for Grand Flamingo tower
    Alejandro Diaz Bazan and Andres Isaias of Andian Group with the property (Bazan)
    Waterfront Miami Beach estate flips for nearly 50% gain in 4 months
    Waterfront Miami Beach estate flips for nearly 50% gain in 4 months
    Aventura Mayor Enid Weisman (Facebook via Weisman, Getty)
    Aventura votes to require HOAs to submit critical reports within 48 hours
    Aventura votes to require HOAs to submit critical reports within 48 hours
    Miami Beach investor Andrew Mirmelli buys waterfront home for $21M, lists it for $30M
    Miami Beach investor Andrew Mirmelli buys waterfront home for $21M, lists it for $30M
    Miami Beach investor Andrew Mirmelli buys waterfront home for $21M, lists it for $30M
    The current Miami Beach North Shore library with Mayor Dan Gelber (Google Maps, Gelber)
    Miami Beach seeks buyers for city-owned development sites
    Miami Beach seeks buyers for city-owned development sites
    The partially collapsed 12-story Champlain Towers South condo building (Getty)
    Inside the tug-of-war over the Surfside condo site’s future
    Inside the tug-of-war over the Surfside condo site’s future
     Adam Neumann (Getty, Bal Harbour Florida)
    Ex-WeWork CEO Adam Neumann inks $44M deal for Bal Harbour properties
    Ex-WeWork CEO Adam Neumann inks $44M deal for Bal Harbour properties
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...