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87 87 INVESTMENT GOVERNMENT PROPERTY PRESERVATION ROI ON HOME FLIPS FALLS TO LOWEST LEVEL SINCE 2009 According to ATTOM's Q1 2022 U.S. Home Flipping Report, 114,706 single-family homes and condos in the U.S. were flipped in the first quarter, representing 9.6% of all home sales in Q1 of 2022, or one in 10 transactions— the highest level since at least 2000. e latest total was up from 6.9%, or one in every 14 home sales in the nation during Q4 of 2021, and from 4.9%, or one in 20 sales, in Q1 of 2021. And while home sales by investors spiked, the typical raw profits on those deals remained below where they were a year ago, and in a more striking trend, profit margins dipped to their lowest point since 2009. "e good news for fix-and-flip investors is that demand remains strong from prospective homebuyers, as evidenced by this quarter's report, which shows that one of every 10 homes sold during Q1 was a flip," said Rick Sharga, EVP of Market Intelligence for ATTOM. "e bad news is that rising mortgage interest rates are beginning to slow down home price appreciation rates, and buyers have become more selective—and less willing to outbid other buyers for properties they're interested in. is is having a predictable impact on profit margins for investors." e typical profit that investors were earning on most fix-and-flip properties was $67,000 in Q1, up 5.5% from the $63,500 earned per sale in Q4 of 2021, and the first increase since late 2020. Year over year, fix-and-flip sales were 4.3% less than the $70,000 earned in Q1 of 2021. Specifically, the median price of homes flipped in Q1 increased to another all-time high of $327,000—up 10.5% from $296,000 in Q4 of 2021 and 30.8% from $250,000 year over year. Both increases stood out as the largest for flipped properties since 2000. In terms of return-on-investment (ROI), the national gross-flipping ROI was down from 27.3% in Q4 of 2021 and from 38.9% year over year. It sat at the lowest point since Q1 of 2009, when the housing market was slumping from the effects of the Great Recession in the late 2000s and the start of the nationwide pandemic. Regionally, the areas recording the largest flipping rates during Q1 included: » Phoenix, Arizona, where flips comprised 18.7% of all home sales; » Charlotte, North Carolina, where flips comprised 18.0% of all home sales; » Tucson, Arizona, where flips comprised 16.2% of all home sales; » Atlanta, Georgia, where flips comprised 16.1% of all home sales; and » Jacksonville, Florida, where flips comprised 16.0% of all home sales. e highest flipping rates during Q1 of 2022 in metro areas with a population of less than one million were found in: » Durham, North Carolina: 15.3% » Gainesville, Florida: 14.9% » Ogden, Utah: 13.9% » Clarksville, Tennessee: 13.4% » Winston-Salem, North Carolina: 13.4% e smallest home-flipping rates among metro areas analyzed Q1 were found in: » Olympia, Washington: 4.4% » Portland, Maine: 4.6% » Salem, Oregon: 4.7% » Syracuse, New York: 4.7% » Davenport, Iowa: 4.9% Profit margins, meanwhile, fell for the sixth quarter in a row, as the typical gross- flipping profit of $67,000 in Q1 of 2022 translated into just a 25.8% ROI, compared to the original acquisition price. In terms of profit and loss, the areas that reported the largest annual declines in ROI were found in: » Salisbury, Maryland, where ROI was down from 173.7% in Q1 of 2021 to 29.3% in Q1 of 2022 » Elkhart, Indiana, where ROI was down from 148.3% in Q1 of 2021 to 24.9% in Q1 of 2022 » Macon, Georgia, where ROI was down from 120.7% in Q1 of 2021 to 50.9% in Q1 of 2022 » Lynchburg, Virginia, where ROI was down from 96.2% in Q1 of 2021 to 31.5% in Q1 of 2022 » Flint, Michigan, where ROI was down from 126.2% in Q1 of 2021 to 64% in Q1 of 2022 Several markets in the Keystone State earned sellers the greatest ROI during Q1 of 2022 on typical home flips, with the top five including: » Scranton, Pennsylvania, where sellers earned 115.5% ROI » Kingsport, Tennessee, where sellers earned 114% ROI » Reading, Pennsylvania, where sellers earned 108.6% ROI » Pittsburgh, Pennsylvania, where sellers earned 105.7% ROI » Johnson City, Tennessee, where sellers earned 101.1% ROI Metro areas reporting the smallest profit margins on typical home flips in Q1 included: » Boise, Idaho, yielding a 4.4% ROI » Fort Collins, Colorado, yielding a 5.7% ROI » College Station, Texas, yielding a 7.2% ROI » Sacramento, California, yielding a 9% ROI » Santa Rosa, California, yielding a 9.6% ROI Cash was king as a means of purchasing flipped homes, as nationwide, 62.7% of homes flipped in Q1 of 2022 were purchased by investors with cash. at figure was virtually unchanged from 62.9% in Q4 of 2021 but up from 60.9% in Q1 of 2021. Meanwhile, 37.3% of the homes flipped in Q1 of 2022 were purchased with financing, nearly the same as the 37.1% portion in the prior quarter, but down from 39.1% year over year. "As interest rates continue to go up, cash buyers should be in an even greater position of competitive advantage in the fix-and-flip market," Sharga said. "It will be interesting to see if the percentage of cash purchases, and purchases made by larger, better capitalized investors, increases over the next few quarters." In terms of timetables, home flippers who sold properties in Q1 took an average of 162 days to complete the sale. And while that was less than the historical averages, it was still up from an average of 154 days in Q4 of 2021 and 157 days in Q1 of 2021.

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