Home Flipping Margins Tighten as Deals Become More Scarce

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In This Article

There’s some good news and some bad news regarding home flipping.

The good news is that despite high interest rates, it’s still possible to turn a profit and make a decent living flipping houses. The bad news is that profits are tighter, and deals are hard to find. You need to flip more houses than before to make the same money as when rates were lower, and sales prices were on the rise. This is according to real estate data and analytics site ATTOM’s First Quarter 2025 U.S. Home Flipping Report.

Flips accounted for 8.3% of all home sales from January through to March this year, which amounts to 67,394 single-family homes and condominiums. It marked a slight increase from the previous quarter’s 7.4% but a drop from the same time last year when flips were 8.7% of all noncommercial residential housing sales.

Profit Margins Shrink

The biggest impediment to house flippers is high-priced homes that leave little room for profit, as it still means buying high and selling higher in a market that has slammed on the brakes compared to the runaway train that it was in 2020. According to ATTOM, the typical investor paid $260,000 for a home they flipped in the first quarter of 2025, selling it for $325,000, netting between $65,000 and $70,000, after holding and closing costs.

ATTOM CEO Rob Barber said:

“The competitive home market means high prices, which is good for short-term investors on the selling end. But that dynamic is also making it harder to find underpriced homes to buy up, and it’s ultimately squeezing profit margins for the industry. It’s tricky to balance at times when the market looks like it could take a downturn. Investors don’t want to buy a property when prices are high and then see them drop before they’re ready to sell.”

Two-Thirds of Major Markets Register a Flipping Downturn

ATTOM analyzed data from metro areas with over 200,000 residents and a minimum of 50 home flips in Q1 2025. Specific trends emerged, with Southern cities, particularly those in Georgia and the Midwest, indicating that flipping is still viable, albeit on a much smaller scale than before.

The most robust flipping markets were, with the highest percentages of flips:

Macon, GA: 21% of all home sales

Warner-Robins, GA: 20.6%

Atlanta: 15.9%

Memphis: 14.7%

Akron, OH: 13.3%

Other than Atlanta and Memphis, metros with over 1 million residents with the highest number of flips were:

Birmingham, AL: 12.8%

Kansas City, MO: 11.6%

Salt Lake City: 11.1%

There have also been some dramatic downturns in flipping from previously prolific markets. The smallest proportion of flips in the largest metros were:

Honolulu: 4.7%

New Orleans: 4.9%

Seattle: 5.5%

Pittsburgh: 5.9%

Portland, OR: 6.1%

Several Southern cities experienced sharp declines in flipping profit margins from quarter to quarter. These were:

Spartanburg, SC (ROI down from 160.2% in Q4 2024 to 31.3% in Q1 2025)

Ocala, FL (down from 125% to 50.6%)

Lynchburg, VA (down from 69.2% to 31%)

Johnson City, TN (down from 82.1 to 44.5%)

In major cities with populations over 1 million, profits were down across the country, from 51.3% to 37.8% in Fresno and 44.2% to 36.1% in New York, with cities in between, such as Pittsburgh, Chicago, and St. Louis also experiencing declines. In only 26% of the 173 areas analyzed, cities experienced profit margins over 50%.

However, and this is where things become interesting, some cities, such as Pittsburgh, experienced a decline in flipping activity but still ranked among the top cities for ROI on the houses that were flipped. That’s because houses in the Steel City are generally more affordable than those in the rest of the country, resulting in a 2% lower cost of living compared to the national average. However, the volume of available inventory is low, which is why the volume of flips has dropped.

Elsewhere, other Southern and Northern cities with populations exceeding 1 million, such as Buffalo, New Orleans, Memphis, and Philadelphia, also demonstrated the greatest profit margins, largely due to their burgeoning economies.

The Lower the Cost, the Higher the Profit

If you don’t have a high-risk tolerance, the resounding message from ATTOM’s ROI data is to stay away from higher-end flips. Metro areas where investors could buy homes for less than $225,000 gave the best returns, offering a median profit of 46.4%. When the cost of a flip was between $225,000 and $400,000, the profit margin dropped to 22%, and above $400,000, it dropped again to 19%.

What the ATTOM data didn’t show was that more expensive houses, often due to their size or the higher-end finishes required, also had a greater likelihood of going over budget and diminishing returns even more.

Cash Is Still King

Leveraging a flip with hard money in an era of high interest rates is always a risky proposition when buyers are sitting on the fence. You may be required to refinance into a conventional mortgage. It’s one of the reasons that 62.2% of all homes flipped during the first quarter were purchased with cash.

It probably comes as no surprise that less-expensive markets were where the highest percentages of all-cash purchases took place. These include:

Rockford, IL (81.6%)

Toledo, OH (81.2%)

Buffalo, NY (81.2%)

Cape Coral, FL (81.1%)

Naples, FL (81.1%)

Final Thoughts

Only the most resilient, experienced, and well-funded are flipping houses these days. If you’re not any of those things, it’s best to stay on the sidelines. Expensive markets are a significant risk unless you have the resources to hold on to a home in case it doesn’t sell at the price you need it to.

House flipping is governed by inventory and interest rates. Although inventory is increasing, it still remains below the recommended six-month supply for a healthy market, indicating demand for houses.

However, prices have not fallen enough yet to entice buyers to make offers while interest rates are high. That doesn’t mean flipping is not possible today, but it does demand a lot of sifting through homes in less-expensive markets to find one that makes sense.

Such is the reticence, however, of flippers to take a risk that if you have deep pockets, you might stand a better chance of negotiating a low price. If your offer is accepted, ensure you have sufficient liquidity to hold on to it in the event that it doesn’t sell.

Eventually, the market will turn around. It’s just a question of when.

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