How to Profit from the Housing Boom
In case you missed it, the United States is in the beginning stages of a housing boom. This makes it the perfect time to benefit from market success before everyone else jumps on the bandwagon. Let’s look at how this happened and what you can do to take advantage of the opportunities available.
Some Housing History
At the turn of the century flipping houses was big business. House flippers were living the good life. Flipping houses was considered one of the most profitable part-time jobs in the United States. There was a point where flippers were actually buying 10% of all the houses being sold. Many investors were juggling several properties at a time, all at different stages of the house flipping process.
Fast forward to 2008. The housing market suffered an epic crash and the average home lost a quarter of its value. All of a sudden investors, construction companies, and house flippers were stuck with properties that were no longer profitable. Some were forced to declare bankruptcy and many lost everything. It was such a devastating event that a large percentage of the players left the game for good.
So how did we get back to a housing boom? It all comes down to supply and demand. Right now there is a shortage of homes for sale in the United States. People that suffered devastating losses in the housing crash got out of the business and those who witnessed the crash got scared to enter the business. Fewer homes have been built in the last 10 years than in any decade since the 1950s.
It’s not just the lack of homes being built that is causing the shortage. There’s another factor: Millennials. Millennials are the largest generation in U.S. history. If you thought Baby Boomers were a driving force in the economy, then get ready for the impact that millennials are making. The average millennial is 34 years old, which just happens to be the age when most people purchase their first home.
Put these factors together and you have the recipe for a major housing boom. We have fewer homes being built at the time when the largest generation in U.S. history is getting ready to buy their first home. It’s a seller’s dream.
Ways to Benefit
The big question now is “How can you benefit from this information?” There are 3 different avenues that could prove lucrative during a housing market boom. Some involve more work than others but each can lead to a valuable return on your investment.
The easiest way to take advantage of the housing boom is to invest in companies related to the market. Don’t just think construction companies, although those are a good choice, but think outside the box to related industries. Forbes recently recommended 2 companies, Vulcan Materials (VMC) and Martin Marietta Materials (MLM), as wise investments. These are companies that sell concrete and gravel used in roads, sidewalks, and home foundations.
If you are willing to put in a bit more work, you may see a more profitable return by flipping houses. House flipping is once again a viable means of making substantial money. This is especially true if you know how to do a large part of the work yourself. Homes flipped in the first quarter of 2019 sold at an average gross profit of $60,000. As the boom continues, profit growth can be expected.
As the housing boom continues, more homes will be built requiring more land to build them on. Investing in property is a great idea at the moment. The longer you wait, the higher prices will go as the market becomes more attractive to builders. Investing in the right properties now could prove a smart move when developers come knocking. Be sure to pay attention to zoning details, which can either help or hinder you when selling your investment property.
The Future is Bright
With 1 in 3 homebuyers being millennials, and that number expected to rise even higher, the housing boom isn’t likely to end anytime soon. Don’t let the crash of 2008 scare you away from from the success you’ve been dreaming about. The housing market could be your ticket to financial success.