Housing Market: Is This The End of House Flipping?

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(By Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Data sourced from Yahoo! Finance.)

Hard economic times fueled by Europe's sovereign-debt crisis and concerns of another US recession have slowed growth in property values and rents. Bloomberg reports that money globally earmarked for real-estate investment through 2012 fell to about $316 billion from $329 billion six months ago.

The change has had a significant impact on the house-flipping market - the practice of buying houses with the intention of quickly reselling for a profit.

Tom Popik, research director for Campbell Surveys, which tracks housing trends for major banks and government agencies noticed that it has become increasingly difficult in the past five years to flip homes for large profits.

"This July, investors flipped only 50% of their purchases, down from 75% a year earlier," he reports to CNNMoney.

As a result, house flippers have become a dying breed of real estate investors. In its wake comes the growing home rentals market, which experienced a 25% increase in demand from a couple years ago.

Real estate analysts find the shift in investments has strong ties to the decreasing liquidity in the market. In the old days, house flippers could expect to flip and earn their profit in the short term, but with lack of funding from buyers flippers can now expect to hold onto a home for roughly five years. By renting out homes an investor can expect to start receiving returns instead of drawing on their own assets.

The shift emphasizes the increasing burden of unwanted homes on the market as their demand declines from both real estate investors and would-be homeowners.

So we're wondering: Which housing stocks are expected to be dragged down by the apparent weakness in the housing market?

For ideas we collected data on short floats, and identified a list of housing-related stocks that have seen a sharp increase in shares shorted over the last month. In other words, short sellers have been betting that these stocks will trade lower over the coming sessions.

Short sellers think there's more downside to these stocks--do you agree? Use this list as a starting point for your own analysis.

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

1. Beazer Homes USA Inc. (BZH): Designs, builds, and sells single-family and multi-family homes in the United States. Shares shorted have increased from 13.67M to 14.67M over the last month, an increase which represents about 1.72% of the company's float of 58.00M shares

2. Hovnanian Enterprises Inc. (HOV): Engages in homebuilding and financial services businesses in the United States. Shares shorted have increased from 12.61M to 14.74M over the last month, an increase which represents about 3.12% of the company's float of 68.23M shares

3. Armstrong World Industries, Inc. (AWI): Engages in the design, manufacture, and sale of flooring products and ceiling systems in the Americas, Europe, and the Pacific Rim. Shares shorted have increased from 1.48M to 1.74M over the last month, an increase which represents about 1.26% of the company's float of 20.62M shares

4. Trex Co. Inc. (TREX): Distributes wood/plastic composite products primarily for residential and commercial decking and railing applications in the United States. Shares shorted have increased from 3.05M to 3.42M over the last month, an increase which represents about 2.86% of the company's float of 12.92M shares

5. Texas Industries Inc. (TXI): Engages in the production and supply of heavy construction materials in the United States. Shares shorted have increased from 5.56M to 5.78M over the last month, an increase which represents about 1.01% of the company's float of 21.76M shares

6. American Capital Agency Corp. (AGNC): Operates as a real estate investment trust (REIT). Shares shorted have increased from 5.56M to 7.46M over the last month, an increase which represents about 1.06% of the company's float of 178.45M shares

7. Apartment Investment & Management Co. (AIV): The company is a real estate investment manager. Shares shorted have increased from 5.49M to 7.05M over the last month, an increase which represents about 1.31% of the company's float of 119.14M shares

8. Education Realty Trust Inc. (EDR): Develops, acquires, owns, and manages student housing communities located near university campuses in the United States. Shares shorted have increased from 3.14M to 4.46M over the last month, an increase which represents about 1.84% of the company's float of 71.68M shares

9. ARMOUR Residential REIT, Inc. (ARR): Shares shorted have increased from 9.39M to 10.21M over the last month, an increase which represents about 1.14% of the company's float of 71.95M shares

10. Campus Crest Communities, Inc. (CCG): Focuses on building, owning, and managing student housing properties in the United States. Shares shorted have increased from 1.58M to 2.10M over the last month, an increase which represents about 1.7% of the company's float of 30.58M shares.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Real Estate , Stocks


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