After sliding from dizzying heights with the housing crash, the number of homes being flipped around the country is back on the rise. As confidence in the housing market solidifies, more investors are willing to take on the risk associated with house flipping.
The housing market in the Salt Lake City area is certainly one that inspires confidence. It’s seen some of the largest home price increases in the country over the past few years, and demand is high. The rub can come in finding a home to buy, since inventory is about one-third of what it was five years ago, according to some industry sources. Interest in house flipping has risen significantly in the area in recent years, but by many accounts it’s more challenging to find suitable properties than it was 10 years ago.
Foreclosures and distressed properties were thick on the ground a few years ago, but they’re becoming less common. These deals are the best bet for securing a property at an attractive price, and these are still out there for investors who know where to look. But the difficulties of “underwater” homeowners often result in their inability to place their home on the market.
That’s why it’s critical for house flippers to have an extensive industry network that can provide access to off-market properties and market information. Increasingly, investors are buying full-priced properties and are still able to turn a profit in most cases. The average gross profit for Salt Lake City house flippers in the first quarter of 2016 was over $58,000.
The potential for profit in the flip is closely tied to the rate of growth in home prices and rents. Median rents in Salt Lake City are growing steadily, currently standing at around $1650, and home values in the state have risen 7.2% since 2015.
This growth is partially a response to the strong job market in Salt Lake City, where jobs grew at a rate of 3.7%, which is nearly twice the national average. The area is attracting a high percentage of companies in the tech and financial sectors, and unemployment is well below the national average, at 3.5%.
While demand for housing is very strong in the area, home sales actually dropped in the Salt Lake City market in the first quarter of 2016. This was due to a very limited inventory of available properties. The Salt Lake Board of Realtors® reports that Salt Lake county currently holds less than a four-month supply of housing inventory.
With the potential for a tidy profit, house flipping is on the rise in the Salt Lake City market. With prices rising steadily and inventories very tight, rehabbed properties are commanding prices that allow flippers to come out ahead. How long this continues will be a function of how rapidly developers respond to demand with new construction, as well as the city’s levels of job growth and employment going forward. For the moment, there’s a bubbling cauldron of activity in residential rehab that shows no signs of cooling off.