Higher interest rates and a shrinking labor pool are squeezing the fix-and-flip housing market, pulling activity down slightly in the second quarter of 2025 compared to both the first quarter and the same quarter last year. This trend is highlighted in the latest fix-and-flip market survey released by John Burns Research and Consulting and Kiavi, which reveals growing challenges for investors trying to buy, renovate, and sell properties quickly for a profit.
According to the survey, only 30% of real estate flippers reported sales that they considered “good” compared to what is typical for the season, a notable drop from 38% who felt this way in the second quarter of 2024. This lower level of satisfaction reflects tougher market conditions for those trying to flip homes. The index tracking availability of homes ripe for flipping also hit its lowest level on record, underlining how difficult it is for investors to find the right properties to work on. Meanwhile, renovation costs remain high, with flippers facing an average $76,000 in expenses, and borrowing has become more expensive, with average loan interest rates reaching 9.5%. These cost pressures are cutting into margins and making the whole venture riskier.
The challenges for fix-and-flip investors are rooted in several key factors. Higher interest rates make financing more costly, affecting both the purchase of homes and carrying costs during renovation. The fast-shrinking labor market compounds the issue by pushing up wages and limiting the availability of skilled workers needed for renovation projects. This shortage not only increases renovation expenses but can also extend the time it takes to complete flips, pushing holdings costs higher and delaying sales.
Across major markets, particularly in places like California, Florida, Texas, and the Southwest, flippers have been hit hardest, with some areas reporting as few as 20% of investors achieving satisfactory sales levels. This suggests regional disparities where supply, buyer demand, and construction dynamics create tougher environments for flipping homes.
Moreover, competition is shifting. The market is not only crowded with more investors seeking deals but also under pressure from new-home builders offering financial incentives that flippers typically cannot match. This competition coupled with affordability challenges among buyers, who are contending with mortgage rates hovering above 6%, restricts the pool of potential buyers for flipped homes. As a result, properties can remain on the market longer, eating into profits.
Despite the current headwinds, the fix-and-flip market still holds some potential, particularly for those investors who can be disciplined in acquisition and budgeting. Flippers who understand their local markets deeply and adapt quickly are better able to find opportunities and navigate the narrowing margins. The key now is speed; every extra day a renovated home sits unsold reduces what investors walk away with.
Real estate experts note that close attention to market data and client needs will be essential. Real estate agents who help investors stay informed and anticipate market shifts may become invaluable partners, guiding them to the most promising properties before they hit the open market.
Looking ahead, the fix-and-flip sector faces an uphill battle. With high renovation costs, more expensive loans, labor shortages, and a challenging sales environment, the days of easy profits in house flipping are becoming a thing of the past. Still, those who can keep a tight grip on budgets, identify undervalued properties, and expedite transactions stand the best chance of weathering the storm.
This latest research from John Burns Research and Consulting and Kiavi serves as a reality check for investors and agents alike, reminding everyone involved that the fix-and-flip market has entered a tougher phase marked by tighter margins and growing complexity. Success will demand sharper strategies, market flexibility, and perhaps a broader view on real estate investing that balances flipping with other approaches like rentals or long-term holding.
