The National Association of Home Builders has reported that home affordability declined in the third quarter of 2017. However, more than half of families that earn the US median household income of $68,000 can afford to buy a home in the current marketplace. Of course, the families that aren’t able to afford homes at that income level live in the most desirable markets. You can get a heck of a lot more house on the median income in Houston than you can in San Diego.
According to the NAHB, 58.3% of homes that sold between July and September were affordable to families at the median income level. That marked a slight decline from the second quarter of 2017.
While the housing market continues to grow stronger with home prices going up around the country, an unfortunate side effect is that more families will be shut out of the housing market. That is part of why 35% of all rental units in the United States today are rental homes and townhomes. That figure has gone up 4% since 2006.
Fortunately, over the next few years the housing inventory should start to catch up with demand. New home sales will continue to outpace sales of existing homes, and new construction should help slow the rise in home values across the country, helping assuage continuing fears of a looming bubble burst.
Indeed, Realtor.com predicts that by the end of 2018, the homeownership rate will stabilize at 63.9%, a very reasonable figure. The site also predicts that Millennials will lead the charge into the home buying market, making up an increasing share of home buyers as the generation keeps #adulting and settling into stable jobs and families.
What does all of this mean for house flippers?
In 2018 and beyond, many of the best ROIs will remain at the higher end of the market. With a dearth of foreclosed properties, the most successful flippers will continue to be those with well thought-out direct mail, web marketing, and person-to-person marketing campaigns.
And house flipping loans will become a larger part of the funding pool for more flippers. The right private money lender can provide residential rehab loans that mitigate risks, defer costs, and help successful investors expand their businesses much more quickly than they could without the extra funding.
To learn more about the current housing market and where we think it’s heading, give our office a call.
