The Motley Fool -- "The House Flipping Statistics Investors Should Know in 2023"
How much money can you make flipping a house? What are the best markets? Find the answers and more here.
By Jack Caporal
House flipping has become increasingly popular over the past few years. In 2017, just 5.7% of all home sales were flips. In 2022, that share jumped to 8.4%.
The popularity of house-flipping shows such as HGTV's Fixer Upper and Flip or Flopprobably has something to do with it. Growing interest from millennials doesn't hurt either.
Are you thinking about getting into the fix-and-flip game? Just want guidance on where to do your next flip? Here are more essential flipping stats to have on your radar.
House flips as a percentage of all home sales
In 2022, 407,417 single-family homes and condos were flipped, roughly 8% of all home sales, according to Attom Data.
That’s the most houses flipped, and the largest percentage of home sales for flips in a single year, since Attom began collecting such data in 2005.
The 407,417 homes and condos flipped in 2022 is a 14% increase from 2021 and a 58% increase from 2020.
House-flipping gross profit and return on investment
In 2022, the average return on investment (ROI) for house flipping was 26.9%, and gross profit was $67,900, according to Attom.
Popular as it is, house flipping has become less profitable over the past several years. In 2017, it netted an average return on investment of 51.4% and average gross profit of $65,000. In 2022, ROI nearly halved while gross profit grew slightly.
Rising median home prices are at least somewhat responsible for declining returns on investment.
Financed flips have fallen over the past couple of years, too. Thirty-five percent of house flips were purchased with financing in 2022, compared to 39% in 2021 and 43% in 2017.
Investors are opting to buy, fix and flip homes with cash as a result of increased competition in the housing market. Sellers typically prefer cash offers, particularly banks and lenders with distressed properties to sell.
Home-flipping returns by state
Homes flipped in Delaware generated the largest return on investment in 2022, providing a 96.1% return on average. While significant, it’s a sizable decline from 2021 when house flipping in Delaware had an average ROI of 156.7%.
Only two other states, Pennsylvania and Maryland, had average returns on investment for house flipping of more than 60%. In 2021, eight states had average returns on house flipping over 60%.
Fix-and-flippers in Idaho had it the worst; house flipping there only netted investors 6.4% on average in 2022.
The ROI for house flipping grew in just five states from 2021 to 2022: Hawaii (+403%), Mississippi (+74%), Ohio (+30%), Iowa (+6%), and Louisiana (+3%).
The states that saw the largest drop in ROI from 2021 to 2022 were Idaho (-59%), Vermont (-47%), Oregon (-42%), Kansas (-40%), and Arizona (-39%).
The best markets for house flipping in 2023
The Salisbury metro area market, which stretches across Maryland and Delaware, boasts the best return on investment for house flipping, generating an average return of 122.9% in 2022.
Pennsylvania is home (at least partially) to six of the 10 best markets for house flipping: Pittsburgh, the Scranton-Wilkes-Barre-Hazleton region, Erie, the Philadelphia-Camden-Wilmington region, and the Harrisburg-Carlisle area.
The worst market for house flipping is Boise City, Idaho, which produced just a 2.7% return on investment for investors in 2022.
Colorado and California are each home to three of the worst markets for house flipping, likely due to already high housing prices in those states.
These are the best and worst markets for house flipping by gross return on investment in 2022:
The worst markets for house flipping in 2023
The bottom line for investing in house flipping
House flipping is not generating the same return on investment as in years past, and gross profit growth year over year is sluggish. Housing prices have been growing faster than the value of flipped homes, which has created a drag on both metrics.
Inflation, rising mortgage rates, and other economic headwinds are also headwinds for homebuyers, and, as a result, home flippers are looking to resell.
Still, house flipping is more popular than ever, and there are lucrative markets to tap into.
Statistics aren't everything, but they can give you a good idea of what sort of competition you'll face and in which markets to focus your investing efforts. You should also use them to set expectations for your next flip and guide you when making an offer.
If a market offers typically low ROIs, you'll need to work even harder to secure a low price point to get returns. Estimating your renovation costs accurately will be even more critical, too.
Sources
- Attom Data (2023). “Home Flipping Remains Up In 2022 Across U.S. But Gross Profits Fall To Another Low.”
