Fix-and-flip profits decline in Q3 2024. Are investors leaving the market?
Investors took a hit in the third quarter of 2024, as flipped properties accounted for a smaller share of the U.S. than in the previous quarter. Short-term investors saw a return on investment (ROI) of 28.7%, up from 31.2% in the second quarter of 2024. The report was released this week.
Reviewed Q3 2024 sales report data from Attom. The analyst firm defined single-family home and condominium foreclosures as “any arms-length transaction that occurred during the quarter in which a previous arms-length transaction occurred on the same property within the past 12 months.”
The report showed 74,618 and A/C conversions between July and September. This was 7.2% of all US home sales, down 40 basis points (bps) from the previous quarter. Investor gains have declined over the same period, and are now about half the average 50% market peak in 2016.
“Home flippers just can't shake the boredom. After more than a year of improvement, over the summer they took a marked turn for the worse,” Attom CEO Rob Barber said in the report. “A quarter's worth of numbers is not enough to make any grand statements about another recession. The next six months should tell more about it, especially if it works in their favor.
“But since it's double what it was a few years ago, and inflation continues to drive up repair costs, investors continue to struggle to find the kind of earnings that will attract more to the game.”
Attom noted that higher maintenance costs, mortgage payments, taxes, insurance and utility costs could negatively impact fixed and flipper profit margins. It was released separately last month and on the online market Market meat they drew similar conclusions. The respondents of this survey mentioned the same costs as the main stressors that change their business activities and decisions.
At the metro level, the share of home fraud among all sales in Q3 2024 declined in 62.8% of areas with sufficient data to analyze, Attom noted in its report.
The five metro areas with the highest turnover share in the third quarter were Warner Robins (22.7%); Macon, Georgia (16.8%); Atlanta (13.6%); Columbus, Georgia (12.8%); and Memphis (12.7%). At the same time, the smallest shares (3.5%); Des Moines, Iowa (3.7%); Honolulu (3.8%); Portland, Maine (3.9%); and Madison, Wisconsin (4%).
The volatile stocks of housing scams tell only part of the story. In the analysis, 183 metros saw a 57.9% profit margin decline from the second to the third quarter.
The most significant declines were in Salisbury, Maryland; South Bend, Indiana; Gainesville, Florida; Peoria, Illinois; and Youngstown, Ohio. The report also noted that profit margins averaged less than 30% for nearly half of all metros surveyed. Profit margins only cleared 50% in a third of these markets in Q3 2024.
Attom also noted that the median sales price for flipped homes was $315,250 in Q3 2024, or $70,250 higher than the median investor purchase price of $245,000.
