After several years of rebuilding following the housing crisis, numerous indicators show that 2016 will be a return to normalcy for the US housing market. High numbers of foreclosed properties are a thing of the past, which is great for the housing market as a whole. For house flippers, it means that there is more competition and narrower margins, but savvy house flippers still have strong opportunities to make excellent profits.
2015 was a great year for house flippers in up-and-coming areas, luxury market, and in growing cities. It was also a great year for buy-and-hold investors who capitalized on rising rent. Here’s what we expect from the housing market in 2016:
Home prices will continue to rise, but at a slower rate
The major upswing in home prices that we saw in 2013 and 14 is over. Home prices will rise the most in dense cities like San Francisco and Los Angeles. In more suburban areas, prices will rise at a much more normal pace, which is a great indicator for the housing market on the whole. It means that we are entering a period of slow and steady growth, which is encouraging to homebuyers at every level of the market.
More people will be able to buy thanks to improved credit and job security
In 2016, we expect to see many Millennials entering the housing market for the first time. People who are nearing retirement age will also likely be a large part of the housing market this year. Savings accounts and investment portfolios are finally stabilized, which is creating opportunities for more people to buy new homes and sell the homes they have been begrudgingly holding onto for the last few years. Interestingly, both of these buying groups may prefer new condos to less affordable single-family homes.
Rents will continue to rise
Rent is already much less affordable than it’s been in our lifetime. But many renters simply can’t afford to make the transition to home ownership. With vacancy rates incredibly low, we expect this to be another optimal year for buy-and-hold real estate strategies.
House flippers will get more creative
House flippers who have already mastered the primary tools of the trade, such as how to best allocate residential rehab loans and which markets to focus on, will get more creative in 2016. We expect many of our clients to start looking into new market segments, considering joint ventures, and finding innovative ways to make their house flipping loans work for them.