Homeowners who are willing to sell their properties in the current market are reaping in profits. Big ones, in fact.
Profit margins on median-priced, single-family home and condo sales jumped to the highest level in a decade during the third quarter of this year, according to a recent report from real estate information provider ATTOM Data Solutions. Nationally, sellers made about 47.6% more—roughly a little over $100,000—than what they originally paid for the typical abode.
The hefty profits are due to the record-high home prices during the COVID-19 pandemic as buyers incentivized by low mortgage interest rates and the desire for more space rushed into the market as the supply of homes for sale was drying up.https://8432b82a168af8568aa608e24d2e2321.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
“That’s how the market has been going for the past year, with mortgage rates superlow and the pandemic’s financial impact largely passing over the middle- and upper-income households most able to pay surging home prices,” says Todd Teta, ATTOM’s chief product office. “Plus, summer is always part of the hottest buying season each year.”
The median home sale price in the U.S. jumped 16%, to $310,500, according to ATTOM.
“The supply of homes for sale did rise during the summer,” says Teta. “But that clearly wasn’t enough to handle the demand, resulting in prices soaring to new highs.”
Home sellers in the Boise, ID, metropolitan area, which emerged as one of the nation’s hottest real estate markets during the pandemic, netted some of the biggest annual increases in profits. They made about 130.3% more than what they paid for their homes, according to ATTOM. (Metros include the main city and surrounding towns, suburbs, and smaller cities.)
“The summer of ’21 was crazy,” says local real estate broker Cindy Oldenkamp, of the Windermere Powerhouse Group in Boise. “The prices kept jumping, there were bidding wars, people who could pay cash edged out those who had to take loans. People were not doing inspections just so they could get the house. Buyers were calling in tears telling me, ‘I’ve made 10 offers and I can’t find anything.’”
Escalating home prices, driven by a housing shortage, began in 2019 and worsened in 2020, when the price of lumber for new homes skyrocketed, says Oldenkamp. But Boise is also attracting buyers from California and other more expensive parts of the country. They can sell their homes there for more money and buy properties in Boise for less, although the competition has pushed prices up.
While the U.S. economy is gradually recovering from damage wrought by the coronavirus pandemic, the housing market is steaming ahead, says Teta. He predicts strong profits will continue over the next two quarters.
Yet, there are small hints nationwide of a possible slowdown, the kind that typically occurs in fall and winter. Mortgage rates and inflation are rising, which could slow home price growth as buyers won’t have as much money to spend on homes.