Gone are the days of investors easily snapping up foreclosed houses on the cheap and rehabbing them for a big profit. Even so, with historically low supply and soaring mortgage rates, some independent house flippers are finding success, and they’re hopeful for the future of the industry.

That sentiment stands out in a restrictive and challenging market, and it’s a contrast to recent data indicating a slump.

Gross profits on typical home flips have been on the decline since 2020, and in 2023 the typical return on investment sunk to its lowest level since 2007, according to a report from property data firm ATTOM. The number of single-family home flips fell in 2023, too, clocking its biggest annual drop since 2008.

But home flippers say they’re experiencing a “strong sales environment” and think the market will keep improving, according to the Burns, Sundae and Kiavi Fix and Flip Survey released this month. The positive results of the poll, a gauge of attitudes in the industry, increased on both a yearly and quarterly basis during the first quarter based on responses from nearly 600 home flippers nationwide. At the same time, the Current Flipped Home Sales Index, a subindex of the broader measurement, reached its highest level since mid-2022.

At the root of flipper success and optimism, the survey found, is low resale inventory propping up prices and sales combined with expectations that the Federal Reserve will cut its federal funds rate this year, a move that will force mortgage rates down.

“Low inventory is creating the current frenzy,” a Seattle flipper said in the survey. “Once rates drop, it’s going to be bonkers” with more demand for flipped homes.

Even so, while the overarching outlook is positive, some regions are experiencing weaker markets than others. In areas such as the Northeast, Midwest and California, where there are older homes in need of more repairs, flippers face minimal competition from homebuilders. Inventory remains low, making for a thriving industry. But in states such as Florida and Texas, where homebuilders and developers are more active and can offer buyers incentives, flippers must contend with a more challenging environment.

The lower home-flipping profit follows a surge during the pandemic. Between the third quarter of 2020 and the first quarter of 2022, the number of single-family homes and condominiums that were flipped grew for the most consecutive quarters since at least 2000, according to ATTOM. At the same time, the number of flip sales accounted for the highest portion of total sales in at least 14 years in 2022. Since then, though, those figures have been declining.

Those changes could be less indicative of a weakening market and more because the home flipper demographic has shifted, according to Kurt Carlton, co-founder and president of real estate investment marketplace New Western. In 2020, the market was saturated with institutional investors and instant digital buyers looking to make cash deals quickly. That’s no longer the case, Carlton said in an interview.

“It looks like transactions are down, but for independent, small real estate investors, this is a growing space,” he said.

The Irving, Texas-based company is the largest homebuyer in the country, purchasing homes viable for rehabbing and then helping investors and flippers find and purchase those properties from its marketplace. Carlton said the company has increased its transactions every year since 2020.

“Your independent local real estate investor, they are very, very fluid. They can react fast,” he said. “They are operating in neighborhoods they know, and they understand, and they’re not as affected by ... the long-term rate environment. And I think they’re all pretty confident that demand in real estate will be here.”

Amber Miller, a home flipper in Minneapolis, shares that belief. Miller started flipping homes in 2008 and said that in recent years, interest in the flipping industry “has started to cool a little bit.”

In an interview, she said “the people who are really interested in doing it as a business are still there. The people who were doing it and thought it was just a quick way to capitalize on a market that was moving really quickly in the right direction — those people I don’t know that they’re interested in it when it’s a little bit more in flux.”

The financing side of flipping has experienced a similar recalibration. The pandemic resulted in the closing of some fix-and-flip lenders, a shift that allowed firms such as Roc360 to “grow in an environment where the lending landscape looks pretty ugly” with less competition, Eric Abramovich, co-founder and chief revenue officer, told CoStar News. At the same time, demand for fix-and-flip loans remained strong. In fact, while Roc360’s overall loan volume decreased between 2022 and 2023, its volume of fix-and-flip loans increased, even as interest rates also climbed.

Other banks and firms that do this type of lending include U.S. Bank, LimaOne Capital and JPMorgan Chase.

The industry is not immune to broader market conditions though, so some flippers and investors have started taking a different approach: renting flips instead of selling them.

Of the flippers polled in the Burns, Sundae and Kiavi survey, 43% said they are keeping more homes as rentals compared to their strategy at the same time last year. On a regional basis, more than half of flippers surveyed in the Northeast and Southern California said they’re keeping more flips as rentals. A greater share of Southwest, Midwest and Southeast flippers also said they were keeping more homes as rentals.

That could be a sign of weakness for the market, according to analysts. “The overall fix-and-flip market is stronger when flippers expect to keep fewer homes as rentals (and weaker when flippers expect to keep more homes as rentals),” the Burns, Sundae and Kiavi report stated.

Growth in single-family rent and home prices could be providing an incentive for buy-and-hold strategies, according to the report. Investors and flippers could also be waiting for resale prices to rise. Half of flippers surveyed think sale prices will climb in the next six months, and on a national level, that growth is expected to be about 2.9%.

Buy-and-hold strategies are also a way for flippers to fund flips, especially in hot markets with strong housing demand. After spending years in the remodeling business as “basically the liaison” between contractors and homeowners, Rachel Spezzapria started flipping homes in Houston in February 2020.

More than four years later, Spezzapria is in the middle of her seventh flip. Usually, those projects get resold, a practice she’s maintained even as the housing market has experienced turbulence in the past few years, as a way to generate passive income. Spezzapria said she usually gets multiple offers on her houses, and she’s never had a property on the market for more than two weeks.

But after her last flip, a 100-year-old duplex in Galveston, Texas, rehabbed and turned into a triplex, Spezzapria decided to try something new: renting the home.

“Having rentals helps fund my next flips, and I think it’s a really good income source,” she said. “It’s going to be super helpful for me having a combination of buy-and-holds and then also flips. It’s going to give me some flexibility.”

Spezzapria will now have three tenants living in the home, and on top of her flipping hustle, she’ll also act as a landlord. Because she has so much money tied up in the triplex, she took a loan from someone she knows to fund her current flip. Spezzapria plans to continue flipping, and she said she expects the market’s strength to persist.

“There are plenty of deals out there for all of us, I believe, even at this time,” she said. “If you’re looking you can find good deals, and if you’re going to be doing good work then yeah, I think there’s plenty for all of us.”

Another shift in the market: finding inventory and appealing to buyers.

The Fix and Flip Survey’s Current Availability of Pre-Flip Homes to Purchase Index, another Burns, Sundae and Kiavi measure, was above the “typical” level for at least the 10th consecutive quarter as of the beginning of this year, though some markets have seen a slight increase in inventory.

“Flippers noted a disconnect in sellers’ high price expectations for pre-flip homes compared to the condition of their homes, leading to heightened competition for a few opportunities,” the report stated. “Resale inventory remains low relative to historical norms, but listings have increased in some markets, lessening competition for acquiring homes to flip.”

Miller, who also runs a coaching business for other home flippers, said she and her students have noticed this shift, too.

When she started flipping homes in 2008, most of the inventory on the market was distressed. Now, Miller primarily works with homes that “a traditional buyer doesn’t have the knowledge or ability or time or even financial resources to go in and do a significant remodel,” she said. Finding those homes can take more time and resources, but the inventory is available.

“There’s plenty of houses that need to be flipped, and there’s plenty of buyers who are looking for houses and are sitting on the sidelines waiting for a house. And so that's really kind of what's fueling our business now,” Miller said.