After the presidential election, federal mortgage rates went above 4% for the first time in two years. Given all of the upheaval that has occurred during the first weeks of Mr. Trump’s presidency, experts really aren’t sure what will happen to interest rates as the year progresses, but the best estimates suggest that the rate will continue to rise at a slow, steady pace. By the end of 2017, interest rates are expected to hit 4.6-4.7%.
At the same time, median incomes are expected to rise, as are home values. According to an article in Forbes, Redfin predicts the median home sale price to increase 5.3% compared to 2016, and Zillow predicts a more modest rise of 3.2%. These stats are good news for house flippers, but not all of the news is good. Home affordability is expected to go down in 2017, meaning that it will be harder for average Americans to buy.
So what does this mean for house flippers?
In 2016, home affordability was also incredibly low, and home prices were on the rise. There were very few foreclosures, and yet, house flippers managed to thrive. Those who did best were the flippers who made the most of smart residential rehab loans in up and coming neighborhoods. The competition was fierce, but those flippers who partnered with experience and did their research ended up with incredible gross profits across the board.
In 2017, we expect more of the same from ZINC Financial clients. House flipping and mortgage rates may never be the best of friends, but despite the expected increase in 2017, we believe that savvy investors will continue to find ways to be competitive, both through traditional flipping and through buy and hold strategies.
2017 is unlikely to be a conventional year in any sense, and that goes for house flipping as well. Our best advice for house flippers is to be open to new strategies and ways of thinking and to be especially careful with financial planning. Choosing a trustworthy private money lender should be among your very first steps to help ensure that you have the funding you need at an agreeable rate when you need it.