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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 72 J O U R N A L July 2023 flipped homes went up slightly faster than they were rising when investors were buying homes. Specifically, in Q1 2023, the typical resale price on flipped homes increased 1.7%, from $300,000 in Q4 2022 to $305,000 in Q1 of this year—better than the 1% increase in the median price that recent home flippers were commonly seeing when they originally bought their properties. The recent profit turnaround—modest as it was—continued an unusual pattern of home-flipping fortunes running counter to the broader housing market nationwide. For the prior three years, investment returns were mostly dropping. That was happening despite prices and profits for traditional sell- ers soaring during an extended, decade-long boom period for the overall market. Home flips as a portion of all home sales increased from Q4 2022 to Q1 2023 in 128 of the 172 metropolitan statistical areas around the United States with enough data to ana- lyze (74%). The increases were mostly by less than two percentage points. Among those metros, the largest flipping rates during Q1 2023 were found in: » Macon, Georgia, where home flips com- prised 16.8% of all home sales » Atlanta, where home flips comprised 15.3% of all home sales » Jacksonville, Florida, where home flips comprised 15.2% of all home sales » Memphis, where home flips comprised 14.4% of all home sales » Clarksville, Tennessee, where home flips comprised 14.3% of all home sales Aside from Atlanta, Jacksonville, and Memphis, the largest flipping rates among metro areas with a population of more than one million were found in Phoenix (13.9%) and Charlotte, North Carolina (13.2%). The smallest home-flipping rates among metro areas analyzed in Q1 were found in: » Indianapolis (4%) » Wichita, Kansas (5%) » Bridgeport, Connecticut (5%) » Madison, Wisconsin (5.2%) » South Bend, Indiana (5.3%) The median $305,000 resale price of homes flipped nationwide in Q1 2023 generat- ed a gross profit of $56,000 above the median investor purchase price of $249,000. That resulted in a typical 22.5% profit margin, up from 21.7% in Q4 2022. Profit margins rose quarterly in 103 of the 172 metro areas ana- lyzed (60%), although they were still below levels from Q1 2022 in 132, or 77%, of those markets. Some of the biggest quarterly increases in the typical profit margin during the early months of 2023 came in: » Shreveport, Louisiana (ROI up from 38.6% in Q4 of 2022 to 92% in Q1 2023) » Lafayette, Louisiana (up from 25.5% to 72.8%) » Savannah, Georgia (up from 14.3% to 56.8%) » South Bend, Indiana (up from 8.5% to 49.4%) » Peoria, Illinois (up from 40.7% to 75.7%) Despite the quarterly gains, typical flip- ping profits remained less than 30% in 81 of the 172 metros with enough data to analyze in Q1 2023 (47%) slightly better than the level in Q4 of last year, but it still was worse than the level of a year earlier, when profit margins on median-priced home flips fell below 30% in just a third of those metro areas. Three years ago, typical investment returns were that low in only a quarter of the same metro areas. Markets with the largest returns on investment for typical home flips completed during Q1 2023 were found in: » Scranton, Pennsylvania (121.9% return) » Pittsburgh (109.8%) » Flint, Michigan (94.9%) » Shreveport, Louisiana (92%) » New Orleans (84.6%) Aside from Pittsburgh and New Orleans, the largest investment returns in Q1 among metro areas with a population of at least one million were in Philadelphia at 78.8%, Balti- more at 69.9%, and Detroit at 68.6%. Metro areas reporting the weakest returns on typical home flips in Q1 2023 were found in: » Austin, Texas (10.2% loss) » Phoenix (2.4% loss) » Ogden, Utah (0.5% loss) » Las Vegas (0.3% loss » Boise, Idaho (0.8% profit) Examining home flip sales by loan type, of the 72,960 U.S. homes flipped in Q1 2023, 11% were sold to buyers using loans backed by the Federal Housing Administration (FHA), marking the third consecutive quarterly gain. The latest portion was up from 9.8% in the prior quarter, and 7.8% a year earlier. Among metro areas with a population of at least 200,000 and at least 50 home flips in Q1 2023, those with the highest percentage of flipped properties sold to FHA buyers (typical- ly first-time home purchasers) were found in: » Modesto, California (32%) » Bakersfield, California (25.7%) » Visalia, California (24.4%) » Stockton, California (23.8%) » Lakeland, Florida (22.2%)