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Trouble Brewing In This Economy? Home Flipping Rates Foretell Problems In Housing Market


Generally speaking, an uptick in home flipping activity could indicate that conditions in the housing market are worsening and home flipping is at a nine-year high. 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, and that isn't a good sign for the housing market.

Todd Teta, Attom's chief product officer, explained that 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. All of that signals a market slowdown and brewing troubles in the housing sector as a whole.

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. –Market Watch

That means home flippers are making less money than previously. "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." Think of it as selling off now before the market tanks.

Researchers have previously described home-flipping activity as a "canary in the coal mine" that could predict a cooling housing market, and a cooling market could lead to an all-out crash similar to the one we experienced during the Great Recession.  Often these market crashes are spurred on by sub-prime loans, and homeowners purchasing more house than they can realistically afford.

The best way to prepare for a market crash is to get your own finances in order. The less money you owe to anyone else, the better off you'll be.  Your house won't be foreclosed on if you own it (so long as you pay your rent to the government; aka, property taxes). All debts should be paid down, and now is not the time to take on more.  If you need help getting started, consider signing up for emails from Future Money Trends.  In those emails is great advice on building wealth and creating a bulletproof level of personal wealth. I have also met several people who have had success following Dave Ramsey's plan, "the baby steps," which he details in his book The Total Money Makeover. This is a great plan for those looking for a "Biblical approach" to money.

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