Reduced inventory has been a blessing and a curse for house flippers over the last few years. According to Forbes, 967,604 homes were for sale in November 2010. In November of last year, that figure was down to 653,347.
On the positive side, low inventories have helped drive home prices up. But on the negative side, the lack of inventory is pushing some potential buyers out of the market by making homes unaffordable for a large portion of the country.
The lack of housing inventory was supposed to begin correcting in 2017, as new construction was expected to take the pressure off of the market and let more people buy. But of the new homes that were actually built, a significant portion were apartment buildings, and the single-family homes in the mix were often built at the higher end of the market or to replace homes destroyed in some of our country’s bigger natural disasters.
The result? Instead of the house flipping inventory improving, the number of homes on the market actually decreased 10.5% year-over-year as of November.
The low real estate inventory in 2018 should encourage more construction firms to start building, but a number of factors may get in the way. The unclear impact of the new tax law, high costs of land and labor, and trouble finding space to build in the most in-demand areas are all expected to have a negative impact upon construction this year.
What does this mean for house flippers?
Fortunately, if you’ve been flipping houses for a few years, you’ve already gotten used to the lack of inventory. The conditions this year shouldn’t change much from last year, except that more buyers might push home values even higher. In this market, finding a buyer usually isn’t the problem – finding an affordable property to flip in the first place is.
In order to stand out in this ultra-competitive landscape, a good marketing plan is essential. That may include direct mailers, a carefully crafted website, and/or investing real time in building your network.
Fast and flexible house flipping loans are also key. Access to financing will help you invest in higher-end flips and more of them, which becomes more and more important as home prices continue to rise.
And of course, careful planning and patience are always key. If the low inventory means you’re doing fewer flips this year, you better make sure they’re great flips.