Of course, anytime the housing market is red hot, the flipping industry will feel the effects, in both good ways and bad. But will the current Trump Bump continue, and if so, how will it affect the house flipping business?
With the housing market on a steep rise, flippers could struggle to find inventory, but the rewards will be greater as you'll be able to sell homes for a higher price. Still, it's helpful to keep a wider perspective on the overall and ever-changing housing industry.
Is It Really a Trump Bump?
Since the housing market already was on the rise before President Trump was elected, some would argue that what's happening currently is just an extension of the rebound begun under the previous administration.
But a recent analysis by ATTOM Data Solutions suggests there might be something to the notion there is a Trump Bump affecting the housing industry. ATTOM analyzed six bellwether housing trends from January to May in 585 major U.S. counties and broke down results by counties won by President Trump and those won by rival Hillary Clinton.
Five of the six bellwether trends favored Trump-won counties, including the all-important median home price, which climbed 4.3 percent in the five-month span in Trump counties and only 4.0 percent in Clinton counties. Home sales volume rose 0.5 percent in Trump counties, as opposed to a 0.7 percent decline in Clinton counties. Trump counties also showed a lower percentage of underwater mortgages and a greater decrease in the number of underwater homes. The decrease in foreclosures also was greater in Trump counties.
Interestingly enough, the one category where Clinton counties performed stronger than Trump counties was in home flipping, as the increase in home flipping closures was greater in those counties during the five months included in the analysis. All of this activity seems to be based more on anticipation rather than by any substantial policy changes enacted by President Trump's administration, as there has been little activity so far that directly affects the housing industry.
What It Means for Flippers
Without substantial policy changes to date, analysts mostly are speculating about what could happen under a Trump administration and how those speculative changes could affect the housing industry.
For instance, trial balloons keep floating up about ending the popular home mortgage tax deduction, which could have a large effect on home ownership and the need for rental housing. This could have a negative effect on the flipping industry as rental buyers are less likely to seek all the amenities that can earn a flipper a higher return on investment. On the other hand, a hot rental market could draw more investors and savvy flippers could take advantage by making quicker turnarounds for slightly lower profit margins. (Think Wal-Mart; lower margins but higher volume equals same or greater overall profits.)
In the meantime, flippers can take advantage of the increasing home prices and lack of inventory to strike a greater profit on current projects or those on the immediate horizon. Home builders will be gearing up to fill voids in the housing market, but they are not able to act as quickly and nimbly as home flippers in taking advantage of immediate conditions.
As is the case with anyone in the real estate investment industry, keeping a watch on the horizon will benefit your business in the long run. One advantage of working in the fix and flip business is that you can adjust your strategy on the fly as your timeline rarely stretches beyond six months. Just as you shouldn't have built your entire business model around buying in the foreclosure market after the housing crash, you shouldn't count on always selling your homes for the sky-high margins you can find in the current hot market.
If you'd like more advice on how to react quickly to changing market conditions and if you're looking to move quickly on homes in this current market, contact our industry experts for advice and encouragement.
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