Category Archives: Real Estate Investment Market

The State of the Union: Real Estate Edition

state of the unionYesterday, the National Association of Realtors released their quarterly report regarding the statistical news of existing-home sales. It has shown that while we have been on a gradual upswing as of the past three months, our summer season ended with a definite decline come August. Now, this news is not to be taken as bad news; there has not been anything terrible happening in the market. We are seeing definite improvement from last year across the board. However, there has been a stall in the constant increases we’ve been experiencing nationwide.

If we break it down by region, the only one that hasn’t had a change in existing-home sales at all from July is the Northeast. The mid-west declined 1.5 percent, the South was down 6.6 percent and the West down 7.8 percent. These numbers may seem to be cause for concern but all of these regions have an average of a 6 percent increase from last year.

Now these statistics aren’t real estate sales across the board. To be clear, existing-home sales according to the NAR consists of completed transactions that include single-family homes, townhomes, condominiums and co-ops. These sales have fallen 4.8 percent from July, but as a yearly average, they are 6.2 percent above a year ago. I know, it’s a lot of numbers.

Experts are saying that the reason for this stall is a lack of inventory in areas like the South and the West. This has caused the prices for said homes to spike drastically to capitalize on the lack of supply to demand. NAR chief economist Lawrence Yun states, “With sales and overall demand higher than a year ago and supply mostly unchanged, low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors.” Basically, the lack of new home construction isn’t reflecting the needs of those in various areas. This increases prices, which has been the issue for the stall. Thankfully, the price appreciation for the limited supply of homes have begun to come out of the unhealthy growth rate and started to even out, which is good for the overall sales.

But rather than end this post on a bad note, here’s something to keep in mind as we head into the next quarter: As our job market continues to improve, it will trickle down to wage increases. This will increase homebuilding and improve home inventory, which will continue to slow down price increases. So in the end, it will all even out. Guess we’ll just have to see what the next quarter has in store…

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The Flip Side of the Coin

Flip-house

If you have kept up with the Bravo channel show Flipping Out, you will know that when the market crashed, it was tough for even the very best house flippers to make any positive traction in the industry for a long, long time. But now that the market is on an upswing, what is it like for those passionate real estate enthusiasts? The answer? Absolutely fantastic.

The basic definition of a “flipped house” is a house that is bought and sold, within a 12 month period. In 2014, the average gross profit on a flipped house was $61, 684. That number has not only increased, but has increased 4% to a huge $72,450, which is the highest it has been in almost 5 years. “The strong returns for home flippers in the first quarter demonstrates that there is still a need in this recovering real estate market for move-in ready homes rehabbed to more modern tastes, particularly given the dearth of new homes being built,” said Daren Blomquist, vice president at RealtyTrac.

And that statement alone is making your average house flipper very happy. With all of the demand for new housing amidst the rise in economy, not only are people ready to move, but they are having to fight to be the highest bidder. And a large majority of these properties are sold to investors looking to rent, which not only raises housing prices in general, but also the flipper’s profits.

Perhaps you’re thinking to yourself… Man, I really oughta look into getting into the house flipping game with all this action going on! And we really don’t have an argument against that notion. But remember this: The key focus to getting the best return on your investment isn’t just finding homes in the best areas. In fact, it’s quite the opposite. The best areas are those that have the most distressed inventory and demand. The strongest cities? According to RealtyTrac, Tampa, Pittsburgh, Memphis, & Chicago are at the top of the list with over 50% ROI.

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