The current recession is affecting real estate unevenly. Retail stores and office buildings are hurting as tenants move out.
Yet housing is still going strong due to rising demand, a limited inventory of homes, and families’ changing housing needs.
Sales of previous owned homes rose 20.7% in June, says the National Association of Realtors.
What’s more, the outlook for housing is bright, says the National Association of Home Builders (NAHB) housing index, which tracks expectations for single-family home sales over the next 6 months.
The August index hit 78, matching the highest level in the index’s 35-year history, NAHB said. This graph shows the NAHB index and new single-family home starts.
Opportunities for renovation contractors are growing because people need affordable houses
An especially promising segment within the housing market is “affordable housing.”
In the Nashville area, about 7 out of 10 households need affordable housing. Occupants of affordable housing pay no more than 30% of their household income for housing and utilities.
During a recession, occupancy rates for affordable housing tend to stay about 3% to 6% higher than other types of housing. As a result, affordable housing tends to hold its value better – which is good for homeowners and investors.
Families’ housing needs are changing dramatically
Six months into the COVID-19 crisis, people realize their housing needs have changed. The more time people spend at home, the more reasons they find to move:
- People who lost a job are trading down to lower rents or house payments.
- Those people who are working from home need more space for home offices and home schooling.
- People are moving out of city centers, seeking more space in the suburbs.
Although mortgage rates are at historic lows, banks have tightened lending standards. Many homebuyers can’t get bank financing for a house, reports the New York Times.
A perfect opportunity to build your business
Right now, the market offers big opportunities for contractors who specialize in fixing up affordable houses. If you’re a craftsperson who’s thinking about starting up your own contracting firm, the current market may present a once-in-a-lifetime opportunity.
By making the right calls, you can grow your business substantially over the next year or two. Here’s how:
- Get to know your local markets for affordable housing.
- Find housing units in desirable neighborhoods that you can fix and flip at a profit.
- Since bank financing is hard to get, work with private investors who have immediate access to capital. You get quicker financing decisions, and fewer strings attached.
Beacon Enterprises LLC plans to do 12 projects, with a focus on the Nashville area, in the year ahead. If you need financing, reach out to Beacon today.
To help you navigate these challenging times as a contractor, find out: