July has exhibited some enduring characteristics that are worth pointing out. If for nothing else, last month was not in line with previous Julys, but rather more indicative of an exciting summer fix and flip market. Let’s take a look at some of last month’s numbers that real estate investors should be excited about this summer:
Those looking to partake in the summer fix and flip market should view these indicators as a sign that the sellers market may be tempering. While far from over, the sellers market doesn’t have quite as much of a strangle-hold over the housing sector, and those looking to buy may want to act sooner rather than later. So whether you are looking to flip a home this summer, or buy your first primary residence, consider the happenings of last month to be a good sign of what may come.
It is worth noting that what is currently driving demand may be the secrete to a successful fix and flip investor. Let’s take a look at what we know so far.
For all intents and purposes, 2015 was the year in which the recovery finally gained the traction it so desperately needed. Nearly a decade since the onset of the Great Recession, the U.S. housing sector improved by leaps and bounds, as evidenced by home sales. Last year was the best year for home sales since 2007, and for good reason; appreciation rates saw equity return to regions that hadn’t seen it in years and homeowners were finally awarded the option to sell.
That said, the first half of this year has seen the positive trends carry over. Increasing a modest five percent over last year, home sales in the first half of 2016 are progressing nicely, and July shouldn’t hold any surprises when the numbers are finally released. At the very least, industry professionals and pundits alike expect to see July’s home sales numbers continue their upwards trajectory. When the numbers are released, don’t be surprises if home sales are the highest they have been in a long time.
It should go without saying, but the sales number I expect to be revealed for July should make the summer fix and flip market even more attractive than it already is; when people are buying, investors are happy. However, it is important to note that, people are looking for specific characteristics the summer. Inventory is still tight and demand is increasing, so fix and flip investors will need to make sure their home stand out. In order to do just that, you need to cater to the right audience.
Investors need to strongly consider who they intend to market their properties to this summer. However, the answer is more obvious than many are aware of: millennials. The millennial generation, those between the ages of 25 and 34, are expected to make up a considerable portion of this summer’s fix and flip market.
According to realtor.com, “they are already the largest buying cohort, but they’re just starting to flex their collective home-buying muscle. Last July, 75% of realtor.com’s 25- to 34-year-old users were looking to buy a home. This July, that percentage increased to 81%.”
If for nothing else, those that cater to the highest population of buyers will increase their chances of success in the current fix and flip market; you can’t put a price on that sort of thing.
It is important to note, however, that millennials are not the only population looking to buy. In fact, while millennials are going to make up a significant portion of buyers, there are increased reports of millennials being outbid by other potential suiters. According to realtor.com, “the biggest jump in the “I’m being over bid” quandary is being reported by 25- to 34-year-olds. Last July only 1.7% of 25- to 34-year-olds reported that being overbid was a buying impediment; this year, that figure climbed to 8%.”
Again, the mere jump in millennial buyers is encouraging enough for those looking to partake in the summer fix and flip market, but the idea of a bidding war for properties should encourage investors.
The summer fix and flip market, however, comes complete with one caveat: low mortgage rates. While todays rates are great for buyers, both young and old, it will make it a lot tougher to receive approval. If for nothing else, the low rates we see today could delay the sales process. While not the end of the world, the investors in the summer fix and flip market should account for the length it may take to sell a subject property. Holding costs can add up, so it’s important that you factor in the length it may take to close a sale this summer.
When it all comes down to it, this summer fix and flip market looks like it is going to be a good one. Investors can take solace in the fact that there will be demand for their properties. As long as they know which market they should target (millennials), they should be able to build off of July’s trends. At the very least, buyer sentiment should keep things moving in the right direction.