Home flipping profits drop at the fastest pace in over a decade – CNBC

Investors are pulling out of the flipping market, as profits drop very quickly. In the third quarter, gross flipping profit fell 18.4% from the previous quarter. Roughly 7.5% of third quarter home sales were flips, still historically high, but down from 8.2% in the second quarter.

As the housing market cools quickly, house flippers are finding it harder to make fast profits.

In the third quarter, gross flipping profit, which is the difference between the median purchase price paid by investors and the median resale price, dropped to $62,000, according to ATTOM, a real estate data provider. That’s down 18.4% from the second quarter and down 11.4% year-over-year. It represents the smallest profit since the end of 2019 and the fastest quarterly drop since 2009.

With that drop in gross profits, the return on investment fell to 25% from 30% in the previous quarter. Not bad, but not as good. Still ATTOM notes it’s not the size of the profits, but how quickly they’re falling. 

With profits shrinking and higher mortgage rates hurting affordability for potential buyers, the share of home sales that were flips fell as well. Roughly 7.5% were flips in the third quarter, still historically high, but down from 8.2% in the second quarter. Flips, defined as homes bought and sold in a 12-month period, made up a 5.9% share of all home sales in the third quarter of 2021.

Home prices are weakening quickly, while renovation costs remain high.

“It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market,” said Rick Sharga, executive vice president of market intelligence at ATTOM, in a release.

The original article can be found here