House Flipping Is Back to 2006 Levels. Should We Worry?
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What recent housing trends are introduced at the top of the episode?
Here's your Money Briefing. I'm J.R. Whelan at The Wall Street Journal in New York. House flipping is just as strong as it was back during the housing bubble in 2016. We'll tell you in a moment why there's less reason to worry this time. First, these money and market stories you should know.
How did employment and job openings data relate to the housing conversation?
You might recall the number of jobs created in February dropped substantially. And in lockstep, the number of job openings fell in February to the lowest level in nearly a year. There were a little over 7 million unfilled jobs on the last business day of February. That's according to the Labor Department. And that was down by more than 500,000 from January's near record. And despite February's decline, jobs remained plentiful compared with the number of Americans who are unemployed but actively seeking work. There were 800... There were 876,000 more available jobs than unemployed people, and such a gap has occurred for 12 straight months, but never previously in the nearly two decades of monthly records.
A report from the State Higher Education Executive Officers Association indicates that states cut funding to their public colleges by $2,000 per full-time student on average in the 10 years since the Great Recession. In 2018, the report says the amount of money states sent to public colleges per full-time student was about $1,000 below pre-recession levels. After five years of state funding increases to public colleges, funding was essentially flat. In response, some schools increasingly turned to out-of-state students and international students to help make up for lost funding. Those are two groups that often pay more to attend public colleges. And as they say, when you gotta go, you gotta go. And in the case of pet dogs, that often means use of a wee-wee pad.
Where are we going with this?
What state funding and college enrollment news connects to broader economic context?
Well, the Wall Street Journal Real Estate Bureau says that the inventor of the wee-wee pad is selling his Fifth Avenue apartment in New York for nearly $40 million. The 5,400-square-foot apartment takes up a full floor, has 10 rooms, an elevator leading to a grand reception area, and overlooks New York's Central Park. The owner bought the apartment in 2000 for about $11 million. And by the way, he developed a cologne for dogs in the early 1970s before hitting a big with wee-wee pads.
When you hear housing bust, you might feel a pit in your stomach. And when we tell you house flipping is on the rise and back at about the level it was during the 2006 housing boom, you might get the same feeling. But things are different this time. And Wall Street Journal reporter Laura Casisto is here to explain why. So Laura, house flipping or buying a house with the intent to turn around and sell it is at levels seen about 12 years ago, but the flipping is actually less risky this time around?
Yeah, that's the idea. This new analysis took a close look at profits and what profits flippers are getting and where they're getting those profits from. What it basically found is that what's really driving profits this time around is more professional flippers buying older homes, putting money into it, taking that dilapidated mansion, making it into a gem.
Why is house flipping said to be back to 2006 levels and who’s reporting it?
And that's a really different thing than what we're seeing last time when we're seeing, you know, just real amateurs buying homes in the suburbs, letting them sit for a couple of years and then trying to turn a profit.
So more institutional flippers at work here.
More institutional flippers and people more putting work into homes, buying those homes that your average home buyer just really doesn't want to take on.
So back in 2006, the homes were really not that old, but the homes today are about a decade older than they were back in 06?
Yeah, that's right. The homes today on average are about 39 years old, and you have markets like Philadelphia on the extreme where the homes are nearly a century old. And so you can understand why just your average 27-year-old first-time buyer doesn't want to take on that 90-year-old Philadelphia mansion.
Right.
A little bit of work needs to be done.
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Chapters
6 chapters
1
What recent housing trends are introduced at the top of the episode?
0:05–0:21
2
How did employment and job openings data relate to the housing conversation?
0:21–1:52
3
What state funding and college enrollment news connects to broader economic context?
1:52–3:20
4
Why is house flipping said to be back to 2006 levels and who’s reporting it?
3:20–4:09
5
How are modern flippers different from 2006—are they more professional and buying older homes?
4:09–5:28
6
What risks and limits remain for flip investors despite higher activity?
5:28–5:38
Speakers
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