3rd Quarter Housing Data Shows Golden Opportunity for Fix and Flips

Posted by Bobby Montagne on Nov 16, 2016

The recent presidential election generated tremendous interest in the Washington D.C. property market. Figures from the third quarter indicate conditions that favor investment in new and redeveloped property, including:

  • Low inventory: Demand for housing outstripped supply in Q3. Strong demand in the first half of 2016 depleted available inventory, plunging to the lowest level since 2013 Q3. There is a lean 2.8-month supply of homes in the D.C. area, compared to a supply of 6 months when demand and supply are balanced. The lack of inventory cut the number of sales and the rise in prices. Nonetheless, year-over-year Q3 sales volume increased 4.1 percent in 2016. Best price growth occurred in the Urban Core and the Outer Suburbs.
  • Faster sales: It took on average only 47 days for homes in the Washington D.C. area to sell during Q3 of 2016, down four days from the previous Q3 and well below the 10-year average of 66 days. The Outer Suburbs saw the steepest drop (six days) in days on market, spurred by low fuel prices, low interest rates, and relatively more inventory compared to closer-in neighborhoods.
  • Seller reluctance: The demand for new and redeveloped units is extremely high, in part due to the reluctance of homeowners to sell. Many owners are simply unable or unwilling to sell if their home hasn’t appreciated enough for them to profit.

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To access Delta Associates full third quarter housing report, click here

An Optimal Time to Fix and Flip

These factors point to a golden, if perhaps short-lived, opportunity to invest in housing throughout the D.C. region. Demand far outstrips supply, inventory remains low and houses sell quickly. Renovation of local properties would help increase the housing supply and increase prices. And the resale of those properties for a healthy profit looks promising. The new administration will be looking to stimulate growth through tax cuts, reduced regulation and job creation, conditions that naturally favor higher housing prices.

The window of opportunity is also defined by the relatively low costs for labor and materials that currently apply. The fiscal stimulus promised by the new administration, which is targeting up to 4 percent annual growth in GNP, could stoke inflationary pressures, meaning a year from now it may be much more expensive to fix and flip residential property than it is today. In other words, the cost of capital may be going up.

Walnut Street have been deeply involved in the local building and development communities for more than two decades. Contact us for information about how we can help you quickly fund your renovation project.

Sources: Delta Associates Third Quarter 2016 Washington Area Housing Outlook, MRIS

Bobby Montagne

Author

Bobby Montagne is a real estate entrepreneur with three decades of experience in commercial and residential property development, finance and sales. Having successfully overseen $15 billion in career transactions, he is among an elite class of real estate innovator that has consistently delivered high quality returns to partners and investors.