Fixed income and browsing decreased in Q3 2024. Are investors leaving the market?

Fix-and-flip investors found success in the third quarter of 2024 as flipped properties accounted for a smaller portion of US home sales compared to the previous quarter. Investors in temporary housing saw a 28.7% return on investment (ROI), down from 31.2% in Q2 2024, according to the report. Atom report released this week.

The Q3 2024 US Home Flipping Report from Attom has updated sales title data. The statistical firm defined single-family home and condominium flips as “any arm’s-length transaction that occurs in a quarter where the previous arm’s-length transaction in the same property occurred within the previous 12 months.”

The report indicated that 74,618 single-family homes and condos were flipped from July to September. That represented 7.2% of all US home sales, down 40 basis points (bps) from the previous quarter. Investors’ profits declined over the same period and now stand at around the mid-market share of 50% in 2016.

“The leaflets at home just don’t seem to move the spirits. “After more than a year of improvement, things got worse in the summer,” Attom CEO Rob Barber said in the report. “One quarter’s numbers are not enough to make positive statements about another downturn. The next six months should speak volumes for that, especially amid a strong housing market to work for.

“But with interest rates remaining double what they were a few years ago and inflation continuing to drive up renovation costs, investors continue to have a difficult time making the kind of returns that are most attractive in this game.”

Higher maintenance costs, mortgage payments, taxes, insurance and utility costs can negatively impact fix-and-flipper profit margins, Attom noted. A separate fix and browse report released last month is Kiavi, John Burns Research and Consulting and the online market Sundae he had similar results. Respondents to that survey cited the same costs as key pressures that drive their business activities and decisions.

At the metro level, the Attom report noted that the share of housing changes among all sales in Q3 2024 decreased by 62.8% of areas with sufficient data to be analyzed.

The five metropolitan areas with the highest shares of flips in the third quarter were Warner Robins, Georgia (22.7%); Macon, Georgia (16.8%); Atlanta (13.6%); Columbus, Georgia (12.8%); and Memphis (12.7%). Meanwhile, the smallest shares were in Seattle (3.5%); Des Moines, Iowa (3.7%); Honolulu (3.8%); Portland, Maine (3.9%); and Madison, Wisconsin (4%).

The changing shares of the local paper only tell half the story. Of all 183 metros in the analysis, 57.9% saw profit margins decline from the second to the third quarter.

Notable declines were in Salisbury, Maryland; South Bend, Indiana; Gainesville, Florida; Peoria, Illinois; and Youngstown, Ohio. The report also noted that profit margins were below 30% in almost half of all metros surveyed. Profit margins only cleared 50% in one-third of these markets by Q3 2024.

Attom also noted that the median resale price for flipped homes was $315,250 in Q3 2024, or $70,250 more than the median investor purchase price of $245,000.

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