ATTOM, a leading curator of real estate data nationwide for land and property data, released its year-end 2021 U.S. Home Flipping Report, which shows that 323,465 single-family homes and condos in the United States were flipped in 2021. That was up 26 percent from 2020, to the highest point since 2006.
The report reveals that the number of home flips in 2021 was up from 257,091 in 2020 to a total not seen since nearly 334,000 homes were flipped by investors in 2006. Last year’s flips represented 5.5 percent of all home sales in the nation during 2021, down from 5.8 percent in 2020 and 6.1 percent in 2019.
But even as quick-turnaround sales by investors shot up, gross profit margins on home flips in 2021 sank to their lowest level in more than a decade after dropping at the fastest pace in more than 15 years.
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Homes flipped in 2021 typically generated a gross profit of $65,000 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was down 3 percent from $67,000 in 2020 and translated into just a 31 percent return on investment compared to the original acquisition price – the lowest margin since 2008. The latest ROI (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was down from 41.9 percent in 2020 and 40 percent in 2019. The decline in the ROI also marked the steepest drop since at least 2005, resulting in margins that were commonly down by 20 percentage points from the 51 percent peak over the past decade, hit in 2016.
U.S. Home Flipping Gross Profits & Returns Chart
“While gross profits were lower for fix-and-flip investors in 2021, there may have been offsets that protected net profits,” said Rick Sharga, ATTOM’s executive vice president of market intelligence. “Fewer flippers financed their purchases, so their cost of capital was lower. And it took less time to execute a flip, reducing holding costs, and suggesting that less extensive – and less expensive – repairs were needed to bring the properties to market. A lot of the mark-up on fix-and-flip properties historically has come from the value of those repairs, but so have a lot of the costs that reduce net profits.”
2021 Gross Flipping ROI by Price Range Chart
Investors saw their gross profit margins dip for the fourth time in five years as the median value of the homes they flipped rose more slowly than the median price they paid to purchase properties – 21.1 percent versus 31.3 percent. The decline in home-flipping profits may represent a rare crack in the foundation of the U.S. housing market, which otherwise boomed in 2021 both because of and in spite of the worldwide Coronavirus pandemic.