Home Flipping Margins Tighten as Deals Become More Scarce

In This Article

There’s some excellent news and a few dangerous information relating to dwelling flipping.

The excellent news is that regardless of excessive rates of interest, it’s nonetheless doable to show a revenue and make an honest residing flipping homes. The dangerous information is that income are tighter, and offers are exhausting to seek out. It’s essential flip extra homes than earlier than to make the identical cash as when charges have been decrease, and gross sales costs have been on the rise. This is based on actual property knowledge and analytics website ATTOM’s First Quarter 2025 U.S. Dwelling Flipping Report.

Flips accounted for 8.3% of all dwelling gross sales from January by way of to March this 12 months, which quantities to 67,394 single-family houses and condominiums. It marked a slight enhance from the earlier quarter’s 7.4% however a drop from the identical time final 12 months when flips have been 8.7% of all noncommercial residential housing gross sales. 

Revenue Margins Shrink

The largest obstacle to deal with flippers is high-priced houses that depart little room for revenue, because it nonetheless means shopping for excessive and promoting larger in a market that has slammed on the brakes in comparison with the runaway practice that it was in 2020. Based on ATTOM, the standard investor paid $260,000 for a house they flipped within the first quarter of 2025, promoting it for $325,000, netting between $65,000 and $70,000, after holding and shutting prices.

ATTOM CEO Rob Barber stated:

“The aggressive dwelling market means excessive costs, which is nice for short-term traders on the promoting finish. However that dynamic can be making it tougher to seek out underpriced houses to purchase up, and it’s in the end squeezing revenue margins for the trade. It’s tough to stability at instances when the market appears prefer it might take a downturn. Buyers don’t need to purchase a property when costs are excessive after which see them drop earlier than they’re able to promote.”

Two-Thirds of Main Markets Register a Flipping Downturn

ATTOM analyzed knowledge from metro areas with over 200,000 residents and a minimal of fifty dwelling flips in Q1 2025. Particular traits emerged, with Southern cities, notably these in Georgia and the Midwest, indicating that flipping remains to be viable, albeit on a a lot smaller scale than earlier than. 

Essentially the most strong flipping markets have been, with the very best percentages of flips:

• Macon, GA: 21% of all dwelling gross sales 
• Warner-Robins, GA: 20.6%
• Atlanta: 15.9%
• Memphis: 14.7%
• Akron, OH: 13.3%

Aside from Atlanta and Memphis, metros with over 1 million residents with the very best variety of flips have been:

• Birmingham, AL: 12.8%
• Kansas Metropolis, MO: 11.6%
• Salt Lake Metropolis: 11.1%

There have additionally been some dramatic downturns in flipping from beforehand prolific markets. The smallest proportion of flips within the largest metros have been:

• Honolulu: 4.7%
• New Orleans: 4.9%
• Seattle: 5.5%
• Pittsburgh: 5.9%
• Portland, OR: 6.1%

A number of Southern cities skilled sharp declines in flipping revenue margins from quarter to quarter. These have been:

• Spartanburg, SC (ROI down from 160.2% in This autumn 2024 to 31.3% in Q1 2025)
• Ocala, FL (down from 125% to 50.6%)
• Lynchburg, VA (down from 69.2% to 31%) 
• Johnson Metropolis, TN (down from 82.1 to 44.5%)

In main cities with populations over 1 million, income have been down throughout the nation, from 51.3% to 37.8% in Fresno and 44.2% to 36.1% in New York, with cities in between, similar to Pittsburgh, Chicago, and St. Louis additionally experiencing declines. In solely 26% of the 173 areas analyzed, cities skilled revenue margins over 50%. 

Nevertheless, and that is the place issues turn into fascinating, some cities, similar to Pittsburgh, skilled a decline in flipping exercise however nonetheless ranked among the many high cities for ROI on the homes that have been flipped. That’s as a result of homes within the Metal Metropolis are typically extra reasonably priced than these in the remainder of the nation, leading to a 2% decrease price of residing in comparison with the nationwide common. Nevertheless, the quantity of obtainable stock is low, which is why the quantity of flips has dropped.

Elsewhere, different Southern and Northern cities with populations exceeding 1 million, similar to Buffalo, New Orleans, Memphis, and Philadelphia, additionally demonstrated the biggest revenue margins, largely attributable to their burgeoning economies. 

Conversely, don’t count on to make massive bucks if you happen to’re flipping homes in these Texas cities: 

• Austin (1% ROI)
• Dallas (3.7% ROI)
• Houston (5% ROI)
• San Antonio (6.9% ROI)

All of them skilled explosive progress after the pandemic and have since seen gross sales costs stall or fall.

The Decrease the Value, the Larger the Revenue

In the event you don’t have a high-risk tolerance, the resounding message from ATTOM’s ROI knowledge is to avoid higher-end flips. Metro areas the place traders might purchase houses for lower than $225,000 gave the most effective returns, providing a median revenue of 46.4%. When the price of a flip was between $225,000 and $400,000, the revenue margin dropped to 22%, and above $400,000, it dropped once more to 19%. 

What the ATTOM knowledge didn’t present was that dearer homes, typically attributable to their measurement or the higher-end finishes required, additionally had a higher chance of going over funds and diminishing returns much more.

Money Is Nonetheless King

Leveraging a flip with exhausting cash in an period of excessive rates of interest is at all times a dangerous proposition when consumers are sitting on the fence. You might be required to refinance into a standard mortgage. It’s one of the explanations that 62.2% of all houses flipped throughout the first quarter have been bought with money. 

It most likely comes as no shock that less-expensive markets have been the place the very best percentages of all-cash purchases came about. These embody:

• Rockford, IL (81.6%)
• Toledo, OH (81.2%)
• Buffalo, NY (81.2%)
• Cape Coral, FL (81.1%)
• Naples, FL (81.1%)

Closing Ideas

Solely probably the most resilient, skilled, and well-funded are flipping homes lately. In the event you’re not any of these issues, it’s greatest to remain on the sidelines. Costly markets are a major danger except you will have the assets to carry on to a house in case it doesn’t promote on the worth you want it to.

Home flipping is ruled by stock and rates of interest. Though stock is rising, it nonetheless stays under the really helpful six-month provide for a wholesome market, indicating demand for homes. 

Nevertheless, costs haven’t fallen sufficient but to entice consumers to make provides whereas rates of interest are excessive. That doesn’t imply flipping isn’t doable at the moment, but it surely does demand numerous sifting by way of houses in less-expensive markets to seek out one which is smart.

Such is the reticence, nonetheless, of flippers to take a danger that in case you have deep pockets, you may stand a greater probability of negotiating a low worth. In case your provide is accepted, guarantee you will have adequate liquidity to carry on to it within the occasion that it doesn’t promote. 

Ultimately, the market will flip round. It’s only a query of when.