U.S. Home Sale Profits Remain High
…But Take Unusual Fall In Second Quarter
ATTOM, curator of the nation’s premier property database, released its second-quarter 2021 U.S. Home Sales Report, which shows that profit margins for home sellers took an unusual
dip in the second quarter but still were far above where were they were a year earlier.
In a sign that the housing market remained super-heated but that investment returns may be declining, the report reveals that the typical single-family home and condo sale across the United States during the second quarter of 2021 generated a profit of $94,500. That was up from $90,000 in the first quarter of 2021 and from $60,572 in the second quarter of 2020.
However, the profit margin on the median-priced house or condominium—he return on investment that sellers made on their original purchase price—declined from 48.4% in the first quarter of this year to 44.9% in the second quarter. While the latest margin remained 13 points above the 32% level recorded a year earlier, the drop-off marked a rare decline during a time of year that usually produces some of the best returns for sellers. The last time typical returns on investment dropped nationally during any second-quarter period was in 2008.
The mixed picture of high, but reduced, profit margins came as the national median home price hit yet another record in the second quarter of 2021, reaching $305,000. That was up 11% from $275,200 in the first quarter of 2021 and 22% from $250,000 in the second quarter of 2020. The annual price surge marked the largest since at least 2006 and was two to four times greater than increases seen just a year ago.
Still, profits dropped in the second quarter of this year because price gains—high as they were—were smaller than increases that recent sellers had been paying when they originally bought their homes. The gap between the latest price gains and earlier increases caused the dip in profit margins.
While home prices rose from the first to the second quarter of 2021 in 98% of U.S. metropolitan areas with enough data to analyze, investment returns rose in only 56%.
The recent price and profit trends reflect a housing market that has continued its decade-long upward spiral, even as the Coronavirus pandemic has damaged significant sectors of the U.S. economy since it hit early last year. Amid rock-bottom interest rates and worries about living in congested virus-prone parts of the country, a glut of buyers have been chasing a tight supply of homes for sale, raising demand and spiking prices.
“Prices and profits from the second quarter painted yet another picture of a housing market in high gear—except for one thing. Profit margins dropped in the second quarter, which is very unusual for any Springtime period because that’s when the housing market is usually hottest or close to it,” said Todd Teta, chief product officer at ATTOM. “While it may just be a momentary thing in today’s volatile market, it’s definitely something to keep an eye on in case it’s a sign that the market is finally cooling or giving in to some of the economic forces connected to the virus pandemic.”
Other Takeaways
- Profit margins rose annually in more than 80% of metro areas around the U.S. and quarterly in slightly more than half
- Western metros continued to have highest profit margins; southern metros have smallest
- Prices up in almost every metro area
- Homeownership tenure fell to 8-year low
- Institutional investment shot up to nearly a 6-year high
- Cash sales up to six-year high
- FHA-financed purchases at nearly 14-year low
