All kinds of uncertainties are swirling around the economy, keeping industry insiders guessing as to whether the long, slow climb out of the last recession may be nearing an end.
But two pieces of that economic puzzle stand to be beneficial for the fix and flip industry:
• Housing inventory remains tight as new construction has not kept up with demand.
• Low unemployment rates, and an apparent lack of skilled workers, finally is putting pressure on companies to raise wages.
Let’s look a little closer at how these two conditions are beneficial to the fix and flip industry.
Housing Inventory
With a tight housing inventory amid economic uncertainty, builders are not going to take chances on building houses in the lower to mid-price range. Their better bet will continue to be higher-end housing, where any economic downturn will be felt less quickly.
This leaves a vast section of the housing market to re-sellers, either the original owners of homes in the low to mid-price range or flippers.
And let’s be honest – a very low percentage of homebuyers are going to be interested in tackling a fixer-upper, despite the popularity of those TV shows. Most people would rather buy a move-in-ready house than deal with all the hassles and headaches that come with updating and remodeling an out-of-date or dilapidated home. Except you, the fix and flippers.
Wage Pressure
One of the great puzzles of this latest economic recovery was when the average worker would begin to benefit as wages remained stagnant. Sure, those who didn’t have a job certainly benefited as more companies were hiring, thereby driving down the unemployment rate. But those who had jobs, even good jobs, felt like they were just treading water as wages barely budged.
Part of this was attributed to the demands of investors to see a higher return on their money, which meant companies were reluctant to share increasing profits with workers at the expense of giving greater dividends to those investors.
But part of it also was reluctance of workers to speak up and demand higher wages. They saw news of layoffs in other industries. They remembered what it was like for so many others who lost their jobs in the recession. They may have been dealing with some of those hungry workers who were willing to come back to work at lower wages than when they lost their former jobs.
All of that could change as unemployment has reached levels below what economists consider full employment. The only people left out there looking for jobs are those that do not have the skills or expertise companies need in a growing economy. Recent hiring reports have looked grim in part because even companies that want to hire cannot find qualified workers.
What this does is it empowers the currently employed to finally speak up for higher wages. Companies without workers are going to be upping their salary offerings to attract already employed workers from other companies. This puts pressure on companies that have workers to raise their wages so they will stay happy and stay put.
All of this bodes well for the housing industry because these workers are finally going to have some extra money in their pockets. They are going to be looking to upgrade their housing situations, whether they are going from renting to owning, going from a starter home to a higher level or going from an older neighborhood to a more modern one.
These movements create opportunities in the fix and flip business, both in the buying and selling end. If you want to take advantage of these opportunities in your community, it’s important that you pay attention to how these economic forces are acting locally. Watch for buying opportunities. Consider what neighborhoods might become hot markets. Monitor what kinds of upgrades will sell in your homes.
As you consider how to react to these economic forces, contact us about the best ways to be prepared to move quickly in financing your purchases and remodeling projects.
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