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June 23, 2019, 7:29 a.m. EDT

Home flipping rate hits 9-year high — and that could foretell troubles in the housing market

An uptick in home flipping activity could indicate that conditions in the housing market are worsening

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By Jacob Passy


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The share of homes sold in the first quarter that were flips was the largest it’s been in nearly a decade.

Home-flipping has rebounded by one key measure. But that’s doesn’t make it an easy path toward becoming rich.

Just over 49,000 single-family homes and condos were flipped in the first quarter of 2019, according to a recent report by real-estate data firm Attom Data Solutions. These homes comprised 7.2% of all home sales nationwide during that time period, representing the highest home-flipping rate since the first quarter of 2010.

But that’s not necessarily a positive indicator of the housing market’s strength, said Todd Teta, Attom’s chief product officer. The number of homes that were flipped was actually down 8% from the previous year to a three-year low. And the number of investors engaging in home flipping has dropped 11% over the past year.

In the first quarter, homes flipped sold for a median price of $215,000. With the median purchase price standing at $155,000, the gross flipping profit was just $60,000, down $8,000 from a year earlier to a three-year low.

Also see: Why Americans are holding off on remodeling their homes (for now)

“While the home flipping rate is increasing, gross profits and ROI are starting to weaken,” Teta said in the report. “If investors are seeing profit margins drop, they may be acting now and selling before price increases drop even more.”

Researchers previously described home-flipping activity as a “canary in the coal mine” that could presage a cooling housing market.

In the first quarter, the home-flipping rate was up year-over-year in 62% of markets nationwide, suggesting that this sentiment could be widespread and not just concentrated in overheated housing markets across the West Coast.

Despite the seemingly turning tides in the home-flipping market, one bright spot is the renewed interest that so-called ‘iBuyers,” tech firms that use algorithms to make instant home offers, have taken in the businesses. Zillow /zigman2/quotes/204413973/composite Z -1.49% , in particular, has said it is investing more money into its home-buying and flipping operation, Zillow Offers, which launched last year. Analysts and stock investors have thus far been receptive of the strategy.

Shares of Zillow /zigman2/quotes/205077794/composite ZG -1.36%  are up nearly 50% year-to-date, whereas the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.42%  and S&P 500 /zigman2/quotes/210599714/realtime SPX -0.65%  are up only 11% and 15% respectively in that same time.

/zigman2/quotes/204413973/composite
US : U.S.: Nasdaq
$ 48.12
-0.73 -1.49%
Volume: 1.69M
July 17, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$10.02 billion
Rev. per Employee
$307,554
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/zigman2/quotes/205077794/composite
US : U.S.: Nasdaq
$ 47.96
-0.66 -1.36%
Volume: 702,033
July 17, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.98 billion
Rev. per Employee
$307,554
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,219.85
-115.78 -0.42%
Volume: 196.78M
July 17, 2019 5:04p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
2,984.42
-19.62 -0.65%
Volume: 1.74B
July 17, 2019 5:04p
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Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.

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