How Old American Cities Are Flipping Their Way To Rosy Futures
Older cities are playing catch up with younger, hipper ones by reinventing themselves and watching the house flippers pour in.
Like baby-faced pop stars from the ’80’s, some of America’s housing stock looks frighteningly old today. That’s because, like your favorite hairband or new wave poseur, half over America’s homes were conceived before 1980. That means a lot of tired stucco, faded carpets and garish wall paper. And don’t forget those Duran Duran and Flock Of Seagulls posters still hanging in the old bedrooms. More specifically, thirty-eight percent of the homes were built prior to 1970. Meanwhile, homes constructed after 2000 comprise 19 percent of the housing stock.
“This housing stock aging trend signals a growing market for remodelers, as older structures normally require additional remodeling and renovations,” the National Association of Home Builders notes on its Eye on Housing blog. “It also implies a rising demand for new construction over the long run.”
Of course, some towns and cities are older than others. And it is here where house flippers have been turning tired into inspired, old school into new and cool. The District of Columbia has the oldest homes with a median age of 75 years. New York and Massachusetts also have some of the oldest housing stock at 57 and 53 years respectively, states Realtor Mag. Rust belt towns with such as those in Michigan (Detroit) and Pennsylvania (Pittsburgh) have also been profitable for flippers in recent years.
Conversely, the western states offers newer housing. The median age of homes in Nevada is 20 years. In Arizona, half of all occupied homes were built in the last 24 years. However, the housing crash of 2008 meant that many of the newer homes in these states fell into disrepair. As credit has increased, they have become prime targets for flippers as well.
What may effect the frenzy of flippers in 2017 is the potential increase in interest rates. While many flippers purchase properties in cash, often using private sources of capital or hard money lenders, buyers on the other end will usually rely on mortgages to get funded. If interest rates continue to rise, they may not be able to qualify for a mortgage—which will, obviously, affect sales. Older properties, especially if they are beat up, tend to sit on the market. These are the ones that could be bought for a song in a down market—pennies on the dollar. The savvy flipper will buy these cash and sell them at a deep discount as well—perhaps, offering lucrative seller concessions like down payment assistance. If the flipper is not desperate for the cash, he or she may even offer to hold the note on the loan until the buyer is able to refinance out—as easier proposition than applying for a mortgage.
The key for many U.S. cities with older homes is reinvention. It’s why Pittsburgh became so popular for house flipping. It has reinvented itself from being a steel town to a high tech, medical and finance center. Similarly, on the East Coast, Newark is trying to re-brand itself as a tech center and has enjoyed an influx of house flippers and developers seizing up its proximity to New York and new businesses in the once heavily blighted city.
Though flipping houses is popular the world over, America, because of its size and baby boomer demographic, makes many cities prime targets for makeovers. Like Sting, Madonna, U2 and other ’80’s pop stars, the rate of success of a city is based upon its ability to re-invent and re-brand itself. It’s the secret to eternal youth.
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