Can You Still Make Money With Spec Homes in California?

Even for those who work in the real estate and development industry, the news reported a few months ago by the San Bernardino Sun in May 2020, just a couple of months into the coronavirus pandemic. While existing home sales during April 2020 posted their lowest number since 2012, there was a bright spot in terms of new construction sales.

In April 2019, local builders in Southern California enjoyed a 7% increase compared to the previous month. Fast forward 12 months to find the United States starting to feel the terrible impact of the COVID-19 pandemic: April 2020 posted a loss of nearly 12% compared to March. New construction sales, on the other hand, were 9% better than March.

The State of Construction in 2020

Seasoned construction and real estate professionals can tell you that the aforementioned statistics are not so surprising. The market for new homes is always strong in California for various reasons, and you can always count on prospective buyers even during downturn periods. To answer the question that serves as the title of this article: Yes, you can still make money with spec homes in California, but you have to play your cards right.

Spec houses are residential construction projects for which no buyer has yet materialized. To a certain extent, building a spec home is similar to developing a gated community in the sense that there is no assurance that buyers will materialize. To an even greater extent, spec home investing is like buying a fixer-upper house for the purpose of remodeling it and flipping it.

Investing in Construction in Southern California

As one of the most expensive housing markets in the United States, Southern California is a great place for spec home investing. This region has always managed to attract wealthy individuals from all walks of life. You have probably heard about Chinese real estate investors who arrive with suitcases full of cash in search of condo units that go back on the market not long after papers are signed at the closing table; these are the kind of investors who always keep some money aside to purchase a new property they can call their own.

As of October 2020, many wealthy families in the United Kingdom were packing their suitcases as they watched the news in dismay. With a no-deal Brexit scenario becoming more likely, quite a few of these families considered relocating to California, a part of the world that tends to appeal to well-off British individuals moving abroad.

With all the above in mind, you should still be confident about your spec home prospects in 2020. When you are ready to discuss architectural floor plans and construction, please feel free to contact our office.