Higher Columbia SC real estate prices have ushered in the return of the house flipper. Flippers are loosely defined as investors who buy homes, maybe perform some minor or major improvements and try to immediately sell the properties –– usually at a much higher price than they paid for it. In 2015, the number of active home flippers in the market reached the highest level in almost a decade. Let's take a closer look at the future of flipping.
Columbia SC Real Estate Flips Popular
According to RealtyTrac, there were nearly 180,000 single-family homes and condominiums flipped in 2015. Technically, a flip is defined as a home that is bought and resold within a 12 month period. Flip transactions comprised 5.5% of all sales in 2015 – the first increase in the flipping share in more than four years. RealtyTrac reports that flipping activity increased in 75% of the nation's housing markets. In addition, profits are setting records, too.
Columbia SC real estate experts attribute the growth in flipping to the renewed confidence in the housing market's ongoing recovery. RealtyTrac says not only is the share of home flips rising again, but even smaller investors are participating in the buy and sell activity.
In some markets across the U.S. there are still a number of distressed properties on the market for sale. And, investor demand fueled by the unstable stock market has reopened this avenue for investment growth and profit gain. Real estate agents report multiple offers on the best investable properties as soon as they hit the market. If there's money to be made in a particular house, the flippers are very interested and are acting fast.
One concern on the horizon is that home prices could be rising too fast – even for the flippers' tastes. the main reason for the increase in prices during 2015 and so far this year is the basic law of supply and demand. The supply of homes on the market is low – especially near the lower end of the housing market – and the demand is high. Everybody, not just the flippers, wants a good deal. The prices for homes sold in January were nearly 7% higher than January 2015 and represented a higher annual gain than the month of December, according to CoreLogic. The fear is that house flipping will cause prices to rise even higher – artificially higher – most notably in markets experiencing the lowest inventory.
Some economists warn that as home flipping increases, it's usually an indication of potential problems in the housing market. Such was the case in the housing boom of a decade ago. The difference then, however, was that the flippers were utilizing cheap and available credit to buy their properties, with little of their own money invested in the homes. Because that type of credit and lending is no longer available as it once was, flippers instead are using a larger amount of their own cash into their deals, even with investor financing.
One leading economist said, "More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicate that flippers in 2015 continued to operate within relatively conservative margins." He went on to say that, "Homes flipped in 2015 were on average purchased at a 26 % discount below estimated market value and resold by the flipper at a 5% premium above estimated market value."
Even more concerning is the ever-weakening home affordability for the first-time home buyer or owner occupant looking to trade up. With first-time buyers comprising a much smaller share of total home buyers today than ever before, the risk of a recurring housing price bubble could continue to dissuade them from buying.
In some markets – especially urban areas – investors have to put more of their money into the property to finance it and renovate homes that are often in critical disrepair. And while the properties can be bought for relatively low sales prices and investors stand to make handsome profits once the houses are renovated and sold, investors must be careful to buy the right property in the right market. The failure to do so will result in not having the buyers they need.
Immediately following the recent housing crash, large institutional investors swooped in and purchased thousands of properties in distress. They were able to transform the overwhelming majority of those properties into single-family rental homes. Institutional investors today are buying fewer properties. Smaller investors are taking their place. And those small investors have a penchant to buy and sell – flip the homes – rather than hold onto them in a Columbia SC real estate investment portfolio.
The total number of investors completing at least one flipped transaction in 2015 was at the highest level in more than eight years. The number of flips per investor was at the lowest level since 2008 according to RealtyTrac.
As home prices continue to rise, flippers in turn are seeing their returns increase. Of the homes that were flipped in 2015, the average gross profit was $55,000 nationwide. That amount represents the highest gross profit levels in a decade (since 2005,) RealtyTrac reports. The return on investment neared 46%, an increase of 2% over 2014 and an 11% increase compared to 2005, when flipping was widespread.
See additional articles pertaining to Columbia SC real estate in the Columbia SC Real Estate News section of our site below Columbia SC Real Estate Categories in the column to your right. You can find information here on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and of course, all the latest Columbia SC real estate news that affects all of these categories.
Remember, we also post tips daily on Twitter and Facebook. Check us out there too.
In the Columbia SC housing market and others throughout the country, as spring approaches so does a feeling of optimism for many looking to buy. Historically, for a variety of reasons, the coming of spring signals the start of the housing market's activity. However, with home inventory at considerably lower levels than most real estate professionals would like to see them, a home search promises to be a challenging and lengthy task.
Inventory Low in Columbia SC Housing Market
With the supply of homes on the market scarce, real estate experts expect demand to continue to rise. Home prices remain on the upswing – not as a result of rising incomes, but simply because of the age-old economic principles of supply and demand. Homes in short supply meet demand at its peak, resulting in a proverbial seller's market enjoying higher sales prices.
While prices continue to rise, some economists say the pace is slowing a bit. Still, the growth in home prices should encourage additional activity in new home construction. Aggregate housing starts have remained above the annual rate of 1 million starts per year for the past eleven months. In addition – and more importantly – single family housing starts have exceeded 700,000 units per year since June 2015. So, in spite of the lagging inventory of homes on the market, housing investment continues to be a positive factor in the growth of the gross domestic product of the U.S.
Homes in or near urban centers are expected to fare the best. The demand to be close to the city or metropolitan areas creates a veritable buying frenzy. Tight inventory will lead to multiple offers as prospective buyers look to purchase – often before the homes officially reach the marketplace.
The prognosis for some buyers isn't quite as rosy, however. Zillow Chief Economist Svenja Gudell says, "There are a lot of economic forces at work behind the scenes that will have a big impact on housing as we enter the busy home-shopping season. Low inventory is a factor in almost every market, so buyers should be prepared for a limited selection in the months to come.”
Some home buyers won't find exactly what they're looking for. Those home shoppers will be faced with an uneasy dilemma. Will they be forced to settle for something that doesn't meet their expectations or needs? Many buyers are hesitant to make a purchase for fear they may get stuck with a house they can't easily resell. In addition, they dread "buyer's remorse" that may set in once they realize they made a bad decision by buying something they really didn't fall in love with.
As a result, renting is always an option. Some prospective first-time buyers have put off buying for a variety of reasons. Chief among them are a lack of a sufficient down payment, fear of taking on additional debt on top of student loans, an ever-changing job market and rising home prices. Plus, statistics have shown that younger buyers are less apt to buy "fixer uppers" at today's prices, primarily due to the cost involved to improve the property to meet their needs.
For those in the Columbia SC housing market looking to buy but possibly deciding to rent until they find their dream home, they're faced with another dilemma: rising rents. The question many will have to ask themselves is, "Does it make better financial sense to buy or rent?" Most real estate analysts say that depends on the old adage of "location, location, location." In some markets throughout the U.S., homeowners can reach the break-even point in less than two years. What that means is home buyers can spend as much to own as to rent, taking into consideration mortgage rates, down payments and taxes. In pricier markets the break-even period may take longer – often between 4-5 years.
Some home buyers remain bullish on buying instead of renting – even though they may not find exactly what they want. They view home ownership as an investment, preferring to buy and hold the house as it appreciates in value. This segment of the Columbia SC housing market is less likely to rent. They consider renting tantamount to throwing money away without building equity in an investment. And, with mortgage interest rates near record lows, buying probably makes better sense for many.
Other factors will impact the Columbia SC housing market this spring. Global economic volatility continues to contribute to an ever-strengthening U.S. dollar. This will ultimately have an effect on demand from foreign purchasers, resulting in keeping interest rates low.
In addition, some U.S. economists warn that continued single-family residential investment as a major component of gross domestic product is worth watching and tracking. Historically, the investment component has been a high-ranking monetary indicator that tends to peak just before the beginning of economic recessions. This has been cited as a reason that some financial analysts point to a "mild to moderate" recession by the third quarter of 2016.
See more articles pertaining to the Columbia SC housing market in the Columbia SC Real Estate News section of our site below Columbia SC Real Estate Categories in the column to your right. You can find information there on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and much more.
Remember, we also post tips daily on Twitter and Facebook. Check us out there too.
Columbia SC homes recently built are more expansive and expensive. And when it comes to homes, American homeowners love their space and spaciousness. However, large sized homes come with larger price tags. As home become bigger they’re becoming less affordable for a bigger group of prospective buyers.
Columbia SC Homes: Big Houses, Big Prices
In 2014 the average size of a new home was 2,660 square feet. In 2015 the average size was 2,720. Nearly half the homes under construction in 2015 had four or more bedrooms. In addition, 25% of the new homes built have three-car garages or larger. With the increased size comes a heftier price. U.S. home prices have increased by 25% since the beginning of the housing market recovery in 2011.The average sales price of a new home in 2015 was $351,000 — compared to $251,000 just six years ago, in 2009.
Your Columbia SC home, no doubt, is one of your favorite possessions. But what happens if a pipe bursts or the water heater stops working? When you were a tenant you simply called the landlord. As a homeowner, now it's your responsibility. Enter the next best thing to a landlord… a home warranty.
Columbia SC Home: Peace of Mind
So just what is a home warranty? Think of a home warranty as insurance coverage for the cost to repair or replace just about any system in your home that may malfunction or wear out. Typical coverage includes heating and air conditioning systems, hot water heaters, certain electrical systems and appliances. Most home warranties cost between $300 and $900 annually.
The beauty of a home warranty is that if something goes wrong, you don't have to call various companies to get repair estimates. And you don't have to pay anything additional out of pocket to fix the issue or replace the equipment. All you have to do is call your home warranty company or enter a claim online. The company then contacts the technicians they work with and either send a repairman or replace the item in question. The only added expense you may have in the case of a brand new replacement would be a co-pay (or deductible) of around $50 per occurrence.
Is a Columbia SC home warranty right for you? The answer is maybe. Home warranties are usually a good idea for first-time homeowners like Gen Xers and Millennials. They're used to calling their landlord, and for the most part, have little or no experience in tackling home issues. In addition, these younger homeowners often work long hours and may not have the time to make lots of phone calls to get repair quotes. Plus, they can't very well take off from work to wait on the repairmen to show up.
When your home was inspected for lending purposes, you may remember the condition and life expectancy of some of your home's systems. Some appliances and systems begin to fail after 15-20 years. And, as luck would have it, when one item goes bad another one soon follows. That's a reason many homeowners welcome a home warranty – it's just one more form of insurance that provides them peace of mind.
Home warranties are also popular with investors or landlords who may have to deal with multiple potential problems in more than one rental property. Most investors have other businesses or other jobs, and the last thing they want to have to worry about is finding a plumber to repair a broken water pipe in the middle of the night.
In summary, home warranties can save home buyers time and money – especially in the first year of home ownership. One last tip, remember the older the home the more coverage you may need to have.
Until recently the Columbia SC housing market has been missing the segment of the population known as "millennials." That generation has been described as having poor spending and saving habits. Many have finished college and are facing repayment of student loans. On top of that, rents have skyrocketed in recent years – increasing at a faster rate than incomes – making it difficult to save money for a down payment to buy a home.
Millennial Growth in Columbia SC Housing
A recent report by the Federal National Mortgage Association (Fannie Mae) cites a larger number of millennials are becoming homeowners. The report says with the exception of the last housing boom from 2000-2005, the number of young, first-time home buyers has been dropping for the last 20+ years. The decline began during the Great Recession and that part of the Columbia SC housing market never fully recovered.
New information provided by the U.S. Census Bureau's American Community Survey shows the number of homeowners aged 25-34 fell an average of 300,000 people each year between 2007-2012. The decrease came despite the growth in the younger population during that time.
In 2013, the decrease in the number of young homeowners improved to roughly 200,000 for the year. According to the Fannie Mae report, the number in 2014 was roughly the same as 2013.
So, what does this mean for the Columbia SC housing market?
Experts expect the young adult population to grow between now and 2020. If this occurs, even a small improvement in the ownership rate would grow that market segment. That should affect the housing industry in several different ways.
The construction of new housing would need to adapt and adjust in the size and types of homes, as well as the geographic locations where the homes are built.
Young adults will have needs and expectations that may be different from their older home buying counterparts. Millennials are used to greater technology, for example, and more open living areas.
There will be a growing need to educate, orient and advise first-time home buyers.
Since buying a home will be a new experience for the young adults, many don't know where to start in the home buying process. They may not know there are mortgage lending programs with low down payments and other advantages for first-time buyers in the Columbia SC housing market.
There will be increasing demand for services and technologies designed to help young home buyers.
Millennials are comfortable with online information research and transactions. Making it easier for them to search, virtually "visit" homes and apply for financing will be key in growing the number of potential young home buyers.
We have more information on the Columbia SC housing market under various sections in our Columbia SC Real Estate Categories to your right, and we also publish updates on Facebook and Twitter. Look for us there as well.