As the housing market cools quickly, house flippers are finding it harder to make fast profits.

In the third quarter, gross flipping profit, which is the difference between the median purchase price paid by investors and the median resale price, dropped to $62,000, according to ATTOM, a real estate data provider. That’s down 18.4% from the second quarter and down 11.4% year-over-year. It represents the smallest profit since the end of 2019 and the fastest quarterly drop since 2009.

With that drop in gross profits, the return on investment fell to 25% from 30% in the previous quarter. Not bad, but not as good. Still ATTOM notes it’s not the size of the profits, but how quickly they’re falling. 

With profits shrinking and higher mortgage rates hurting affordability for potential buyers, the share of home sales that were flips fell as well. Roughly 7.5% were flips in the third quarter, still historically high, but down from 8.2% in the second quarter. Flips, defined as homes bought and sold in a 12-month period, made up a 5.9% share of all home sales in the third quarter of 2021.

Home prices are weakening quickly, while renovation costs remain high.

“It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market,” said Rick Sharga, executive vice president of market intelligence at ATTOM, in a release. “With demand from buyers weakening, prices trending down over the past few months, and financing rates significantly higher than they were at the beginning of the year, flippers face a much more difficult environment today, and probably will in 2023 as well.”

Home prices are still higher today than they were a year ago, but each month the gains are shrinking dramatically. Mortgage rates have come off their recent highs, but they are still more than twice what they were at the start of this year. The combination has caused home sales overall to drop for nine straight months.

While mortgage rates have dropped slightly over the past two months, that may not matter too much to flippers since about 64% of them use all cash. That is unchanged from previous quarters.

Another factor weighing on investors is the cost to flip. Prices for labor and materials remain high, and supply-chain delays are still factoring into renovation costs. The average time it took to flip a home in the third quarter did drop slightly to 163 days, after rising for three consecutive quarters. That is still, however, longer than the 149 days it took to flip a home in the third quarter of last year.

Markets that showed the highest flip rates were Phoenix; Spartanburg, South Carolina; Atlanta and Gainesville in Georgia; and Winston-Salem, North Carolina. The markets offering the best returns were Buffalo, New York; Pittsburgh and Scranton in Pennsylvania; and Salisbury, Maryland.