Is it Smart to Flip Reno Houses in Today's Market?

HERE ARE 3 IMPORTANT THINGS TO CONSIDER ABOUT FLIPPING HOUSES IN TODAY'S MARKET.

1. THE ROI ON FLIPPING HOUSES REMAINS FAR BELOW ITS PEAK.

Approx. 8.2% of all residential real estate transactions were house-flips in Q2 2022 according to Attom Data Solutions, a leading real estate data provider. That's down from 9.7% in Q1 2022 but still up from 5.3% in Q2 2021. Meanwhile, average house-flipping profits remain far below their peak due to increased competition, rising mortgage rates, and a slowdown in house price appreciation.

2. RENOVATION COSTS AND TIMELINES ARE SOARING.

The costs to renovate and repair a home have soared in the wake of a labor shortage, supply chain disruptions, and rising inflation. This means that it may take you longer than expected to fix and flip the home. Also, be sure to budget for higher costs, which of course, will eat into your profit margins.

3. THE HOUSING MARKET HAS STARTED TO SLOW DOWN.

It's highly unlikely that house prices will crash because we have an ongoing shortage of housing inventory in the US. Even so, annual house price appreciation is expected to slow to its long-term average of 3%-4% during the next 12 months. We've already seen month-over-month price declines in some extra-frothy markets. This means that you may not get as much as you initially anticipated when you go to sell the house.