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Higher interest rates and faster shrink labour markets are taking a hit on the revised housing market. Investors are beginning to be pulled back as costs rise and as they take longer to sell their renovated homes.
According to the index of Kiavi, a lender focused on John Burns Research and Consulting and real estate investors, the Fix and Flip market has signed slightly since the second quarter of this year, and has signed even more rapidly since last year’s second quarter.
“Emotions remain stifled as economic uncertainty, mortgage rates, and rising resale inventory are on demand for reversed homes,” wrote Alex Thomas, John Burns Research and consulting, the report’s leading author.
The index examines around 400 flippers and measures current sales, expected sales, and flipper competition for transactions. All of these sub-indiss fell last quarter. As supply of both new and existing homes for sale rose, the number of days in the marketplace of upset homes has increased.
Just 30% of flippers reported “good” sales in the second quarter of this year compared to seasonal standards, down from 38% in the same quarter in 2024.
“What our customers are really experiencing is that it really comes down to a timeline of home speed and sales,” said Arvind Mohan, CEO of Kiavi. “They definitely belong to the speed business, so if they need an extra month to complete a transaction, it’s the capital tied to that property that cannot necessarily be released for the next investment.”
Almost a third of flippers pointed to a decline in the availability of labor due to immigration enforcement and fear-based absence from the field. Flip’s labor and material costs reached record highs, but the cost as a percentage of the selling price remained flat.
“From an ROI perspective, we don’t see much change there. People are still getting 30% to 31%,” Mohan said.
“We definitely need to take a step backwards as a more specialized cohort, become more conservative and choose more?” Mohan said. “If you’re about to buy four of the six opportunities a year ago, they may buy two or three of the six for preparation. Once the market is reset, you can reset the purchase price and keep the ROI metrics constant.”
Regionally, flippers in Florida, Northern California and Southwest had poorer sales than flippers elsewhere.
“Flippers in these regions face increased resale, significant competition from home builders, and rising costs (particularly insurance),” Thomas wrote in the report.
Flippers also face the possibility of lower prices depending on where they work. Although home prices are slightly higher nationwide than a year ago, profits are shrinking rapidly, and some markets, especially those that have overheated in the first few years of the pandemic, are firmly negative.
According to Cotality, prices in June were 1.7% higher than in June 2024. Prices rose just 0.1% per month. This is the lowest monthly rate since 2008.
As a result, Mohan said lenders like Kiabi are becoming more cautious.
“I have definitely been closer in my credit box over the past 12 months and have made a little more choice about what kind of customers I want to work with in this environment.
