A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. Higher mortgage rates, high real estate prices and tight supply are all conspiring to force investors into the house flipping game. During the year 2025, approximately 297,000 single-family homes and condos were flipped nationwide, according to ATTOM, a real estate data provider, which defines a flip as a home bought and sold within the same 12-month period. This is a 3.9% decline from 2024 and the lowest number of market flips in a year since 2020. Investor flips made up 7.4% of all home sales in 2025, compared to 7.6% in 2024. Flips are declining because the profits are becoming less and less worth it. Amid the highest median home prices on record, a typical house flip earned investors just $65,981 in gross profit, or a 25.5% return on investment, according to ATTOM. That’s down from 32 percent the year before and the lowest rate since the Great Recession of 2008. “Competition for housing remains strong in many markets due to limited supply,” Rob Barber, CEO of ATTOM, said in a statement. “With prices remaining high, investors are finding it harder to make deals that generate strong returns.” For comparison, in the boom decade following the financial crisis, profit margins were over 50%, peaking at 61% in 2012, around the time property prices hit their lowest point. Net profits, or investor returns that take into account the cost of repairing the property, can vary greatly depending on local costs of labor, materials and financing. However, in the United States, the cost of repairing properties before resale remains high due to continued supply chain pressures and tariff-related material price increases, which continue to squeeze investor margins, according to ATTOM. There are signs, however, that the flipping market could improve this year, as house prices are expected to moderate further and mortgage rates will remain below year-ago levels. “After nearly 4 years of declining flipped home transaction volume, our survey detects signs of positive momentum in the fix-up and flipping space,” wrote Alex Thomas, research director at John Burns Research and Consulting, in a recent report. The company partners with Kiavi on a Fix and Flip housing market index, which examines investor sentiment in the market. In the fourth quarter of 2025, it recorded the largest quarterly increase in three years and a reversal of six consecutive quarters of decline. Additionally, 71% of investors surveyed said they planned to buy more homes this year, up from 66% last year and 49% in 2024, according to the JBRC/Kiavi survey. This is the highest share in its four-year history. Fewer flippers are also reporting disappointing results from their investments. Nationally, 17% of flippers in the fourth quarter reported selling “mostly below” expected after-repair volume, or ARV, down from 21% in the previous quarter, according to the survey. “Because flippers tend to drop prices faster than typical home sellers during downturns (to avoid costly holding periods), this improvement is an early signal that the pricing environment is strengthening,” Thomas wrote. He also said several provisions in last summer’s “big, beautiful bill” could increase the profitability of repair and flip operations, including enhanced depreciation, a permanent 20 percent business income deduction and deductible interest expense on repair and flip loans. Other measures of real estate flipper sentiment, including the RCN Capital Investor Sentiment Survey, a quarterly report prepared by CJ Patrick Company, also cite optimism. “It’s these improving market conditions – more inventory, moderate home prices and slightly better financing costs – coupled with pent-up buyer demand and the increasing number of distressed properties for sale that I think should provide more opportunity for flippers as the year goes on,” said Rick Sharga, CEO of CJ Patrick. The wild card will be mortgage rates. More and more investors are using financing, at 37.7% in 2025 compared to 36.9% in 2024, according to ATTOM. A rate cut was expected this year, but the war in Iran and the resulting rise in oil prices upended those expectations. “Pinball machines need to get more creative to maintain profitability,” Barber said. “This could include taking over older homes, since the median property flipped in 2025 was built in 1978, the oldest since we started tracking, as well as tighter cost controls and more disciplined renovation strategies.”