Home Prices are Rising, NOT Falling, in Light of the Pandemic. What?!
This is not news: In light of the Coronavirus pandemic we are sheltering at home. Construction is on hold. Realtors are only doing showings in vacant homes. Many homeowners who put their homes on the market are taking them off. Homeowners who thought about listing their home for sale are waiting until economic conditions improve. And yet, the news is; median home prices of homes sold in March edged up 8% year-over-year. What?!
Notwithstanding the economic turmoil and fear. Fannie Mae said in April that median existing home prices will trade slightly higher in 2020 when compared to 2019. The strength in the residential real estate market is largely due to the dearth of supply of available homes for sale. The housing supply has been shrinking over the past few years. At the end of March there were 1.5 million units for sale, down 10.2% from last year and also a 5 year low.
What does this mean for home flippers today? Low inventory means flips are a commodity. We all want to be in a commodity business. That said, until both home buyers and home sellers feel that the threat of the virus has passed, if you have a vacant property for sale, a walkthrough can be more easily arranged. Most people would not buy a car, let alone a home until they have physically sat in the car or walked through the property. This is a huge advantage for home flippers. Houses near completion should be put on the market immediately. People are always moving for various reasons and having a limited housing supply will increase the likelihood of a quick sale. Even as the pandemic fear subsides, the years of an ever-shrinking housing inventory will not reverse course in a meaningful way for the foreseeable future. This, in and of itself, should keep home prices stable and flipping a good business to be in.
Read this great article from the Wall Street Journal for more information on this topic.