Just over 49,000 single-family homes and condos were flipped in the first quarter of 2019, according to a report released this week 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.
“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 Z, -1.27% 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 ZG, -1.36% are up nearly 50% year today, whereas the Dow Jones Industrial Average DJIA, +1.02% and S&P 500 SPX, +1.05% are up only 11% and 15% respectively in that same time.
The SPDR S&P Homebuilders ETF (XHB) was unchanged in after-hours trading Friday. Year-to-date, XHB has declined -7.91%, versus a 8.22% rise in the benchmark S&P 500 index during the same period.
XHB currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #32 of 41 ETFs in the Consumer-Focused ETFs category.
This article is brought to you courtesy of MarketWatch .