Why it’s still a good time to invest in the housing and flipping markets
The evolution of the U.S housing market during the current economic expansion has many people wondering if there is still potential growth in homeownership.
From April 2006 to March 2011, the Great Recession saw the home price index decline by 33%. A report by CoreLogic digging and analyzing into the housing market’s performance highlights the role of housing in the longest economic expansion and recognizes how homeownership is seen as a crucial step towards wealth accumulation, while job growth, mortgage funding and underwriting have contributed to the recovery of the housing market’s historic crash. Increased home prices increase equity.
“The total number of U.S. residential properties in negative equity has dropped by more than 21 percentage points since the first quarter of 2010,” said CoreLogic. Between 2012 and 2013, the market took a turning point when the percentage of homes in negative equity went from 22.4% to 15.5%. “During this time, the average homeowner gained $35,100 in home equity—a welcome reprieve after seeing negative returns in 2011.”
The total home equity reached a record of $15.8 trillion in the first quarter of 2019 up from just $6.1 trillion 10 years prior.
The Recession led to an increase of renters because homeowners saw drastic losses in terms of their home values. In the years following the downturn, 2009 to 2012, 12.9 million households joined the rental market. It was only a matter of time before homeownership returned in full force; In 2019, the market saw 1.1 million new homeowners compared to only 458,000 new renters. Renting is far from dead, however, as the lack of inventory in many housing markets and the increasing costs of labor and materials continue to drive up the cost of housing, keeping many would-be buyers on the sidelines in rental accommodation.
There has also been renewed energy in home flipping. Just over 11% of the market consisted of flipped homes in the first quarter of 2006 and flipped homes made up only 4.9% of the market by the end of the recession. In the first quarter of 2019, that number increased to 11.4%.
“In addition to a more encouraging market, changes in homes and buyers have made flipping more sustainable—professionals are flipping older homes with the median age of the homes being 39 years old,” said CoreLogic.
Some peoplemay be concerned that there’s potential for another recession in the near future. CoreLogic suggests most signs point to continued good news for the housing market with forecasts predicting a moderate but healthy 5.6% acceleration in annual home price growth from June 2019 to June 2020. The future is still ripe for continued growth.
