A New York-based real estate group led by developer Dash Davidson has completed nearly all the renovations on the historic 1911 building at 2 Hammond St. in downtown Bangor, which now houses eight high-end apartments. Credit: Linda Coan O'Kresik / BDN

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Home flipping reached its highest rate since 2000 in the first three months of this year across the nation and in parts of Maine, but cost pressures are reducing the amount of money investors get back, a new study showed.

Almost 10 percent of homes sold nationwide and 4 percent of those in Maine were bought, fixed up and resold — a process known as flipping — within one year by investors, according to real estate database ATTOM Data Solutions.

But they are seeing less of a payback, with higher costs for materials eating into margins and rising mortgage rates dampening how much prospective homebuyers are willing to spend, it said.

In Maine’s largest metropolitan area of Portland and South Portland, flipped home sales declined almost 3 percent from the last quarter of 2021 until the first quarter of this year. However, they were up almost 75 percent compared to the first three months of 2021.

Some 78 flipped homes were sold in the Portland and South Portland area in the first quarter of this year, representing 4.6 percent of total sales. That is among the lowest percentage of flipped home sales in the country.

At the same time, the gross profit for a home purchased for a median price of $350,100 was $39,900 in the first quarter, down from the year-ago gross profit of almost $59,700. The gross profit is the difference between the median purchase price of the home and its median resale price.

The state overall bucked national trends with a 2 percent decline in the number of flipped homes sold in the first three months of this year compared with the last three months of 2021. However, the 139 homes flipped reflected a 73 increase over one year ago.

Investors saw gross profits rise about 5 percentage points to more than 29 percent in Maine, but nationally they were down 13 percentage points to almost 26 percent.

The peak of 208 flipped home sales in Maine was in the fourth quarter of last year, one quarter ahead of the national peak in the first three months of this year.

It is difficult to gauge how many of today’s home buyers plan to flip their homes because the fix-up process can take at least 9 months before they go on the market.

As a rule of thumb, investors should not pay more than 70 percent of their expected after-repair value of the home, minus repair expenses, according to Investopedia. Investors should expect to spend 10 percent to rehabilitate a home.

“The good news for fix-and-flip investors is that demand remains strong from prospective homebuyers,” Rick Sharga, ATTOM’s executive vice president said. “The bad news is that rising mortgage interest rates are beginning to slow down home price appreciation rates, and buyers have become more selective.”

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Lori Valigra

Lori Valigra, senior reporter for economy and business, holds an M.S. in journalism from Boston University. She was a Knight journalism fellow at M.I.T. and has extensive international reporting experience...