While the Great Recession slowed down the construction of new homes, thanks—in part—to disruptions in supply chains and the increased costs of lumber (thanks, COVID), the good news is that there is perhaps an even greater appeal to fixing (and flipping) older homes. In fact, the National Association of Home Builders (NAHB) Remodeling Market Index (RMI) has shown consistently high numbers for the remodeling market’s conditions. As the median age of homeowners has shifted from 31 in 2005 to 39 in 2019, and the costs of homes have also increased significantly, the indication is that there are greater opportunities for millennials to spend their money and time on home improvement projects, and perhaps even ground-up construction to add to the housing inventory.
What is an aging housing stock?
While the age for homeowners has ticked up over the last several years, so too have the individual houses themselves. An aging housing stock often refers to houses built on or before 1980, indicating that there is—or will be—need for moderate to extensive repair work. For example, as of 2018, nearly 80% of Rochester, New York’s single-family homes were at least 20 years old and more than half were built before 1980.
For fix-and-flip investors, this means the potential for many flipping opportunities, particularly if houses are acquired in desirable or up-and-coming neighborhoods. This is particularly prescient given the slow recovery of new home construction (In 2019, Trulia surveyed more than 1,300 homeowners in the U.S., discovering that nearly 90%planned to remodel.).
The COVID-19 pandemic only spurred on the need for renovations, and as investors continue buying and repairing older houses, the new housing trends will only continue to further impact the need for extensive updates to better suit today’s market needs.
For Temple View Capital, LLC (“Temple View”), the new real estate investment opportunities offer the chance to partner with both first-time and veteran investors and create investor-focused loan programs. Moreover, Temple View becoming the first private money lender to become carbon neutral means greater opportunity to prioritize the building of sustainable, equitable, healthy, and diverse communities.
As for the foreshadowing of the market’s propensity to remodel older homes, the RMI was redesigned in 2020 to better interpret and track industry trends. While readings cannot be compared quarter to quarter until enough data are collected seasonally, the redesigned survey “asks remodelers to compare market conditions to three months earlier, using ‘better,’ ‘about the same,’ ‘worse’ scale.”
In the fourth quarter of 2020, 68% stated that conditions were the same as they were in 2020’s third quarter.
If you are ready to explore your real estate investment options and are strongly thinking about flipping a property, contact Temple View today.