1Q Home Seller Profits Dip, But Remain Higher than Year Ago
(Chart courtesy ATTOM Data Solutions.)
ATTOM Data Solutions, Irvine, Calif., said profits for home sellers nationwide fell slightly in the first quarter but improved year over year—another sign of how the housing market is fending off economic damage caused by the coronavirus pandemic.
The company’s quarterly U.S. Home Sales Report said the typical first-quarter home sale in the United States generated a profit of $70,050, down from $75,750 in the fourth quarter but up 26 percent from $55,750 a year ago. That profit represented a 34.2 percent return on investment compared to the original purchase price – down from 37.1 percent in the fourth quarter but higher than the 30.8 percent level recorded a year ago.
Todd Teta, chief product officer with ATTOM Data Solutions, said small dips in profits are common in the first quarter as the home-buying season goes into its annual cold-weather lull. But raw profits, as well as the return-on-investments on sales of median-priced homes in the first quarter,still stood at the second-highest points since the U.S. housing market began recovering from the Great Recession in 2012. He said they were among the many signs that the nine-year U.S. housing market boom continues to surge ahead even as the broader economy struggles to rebound from the pandemic’s effects.
“The U.S. housing market keeps roaring ahead even as major parts of the broader economy try to overcome the impact of the pandemic,” Teta said. “However, the market did take a break from rising prices in the first quarter of 2021, and while that’s not unusual for the beginning of the year, it’s definitely something to keep an eye on as we move into the spring buying season. The next few months will speak huge volumes about whether the market keeps barreling ahead. For now, though, sellers remain in the driver’s seat, ringing up great profits.”
ATTOM said the elevated profits and profit margins in the first quarter came as the national median home price decreased 2 percent from the fourth quarter, to $275,000, but remained 16 percent higher than where it stood a year ago. Median values, measured annually, rose in 97 percent of markets around the country with enough data to analyze, jumping by at least 10 percent in more than three-quarters of them.
Other report findings:
–Typical profit margins rose from first quarter 2020 to first quarter 2021 in 131 (88 percent) of 149 metropolitan statistical areas around the United States with enough data to analyze. The biggest annual increases in profit margins came in Knoxville, Tenn. (122.1 percent); Nashville, Tenn. (92.1 percent); Boise, Idaho (102.8 percent); Crestview-Fort Walton Beach, Fla. (58.7 percent) and Chattanooga, Tenn. (72.5 percent). Profit margins dropped, year over year, in just 18 of the 149 metro areas analyzed (12 percent).
–The West continued to have the largest profit margins on typical home sales around the country, with 16 of the top 20 returns on investment in the first quarter, from among the 149 metropolitan statistical areas. Sixteen of the 20 smallest margins were in the Southern region.
–Despite the economic fallout from the coronavirus pandemic, median home prices in the first quarter surpassed figures from a year earlier in 97 percent of metropolitan statistical areas. Nationally, the median home price of $275,000 in the first quarter was up 16 percent from $236,250 a year ago, despite a 2 percent drop from the peak of $280,000 in the fourth quarter.
–Homeowners who sold in the first quarter had owned their homes an average of 7.94 years, down from the high for this century of 8.17 years in the fourth quarter, but up from 7.7 years a year ago.
–Nationwide, all-cash purchases accounted for 26.5 percent of single-family home and condo sales in the first quarter, the highest level since first quarter 2019. The first-quarter 2021 number was up from the 22.9 percent in the fourth quarter and from 26 percent a year ago.
–Distressed home sales — including bank-owned (REO) sales, third-party foreclosure auction sales and short sales — accounted for just 5.8 percent of all U.S. single-family home and condo sales in the first quarter, the smallest portion since fourth quarter 2003. The latest figure was down from 6.6 percent in the fourth quarter and from 9.4 percent a year ago, to a point that was less than one-seventh of the 42.2 percent level hit in first quarter 2009.
–Institutional investors nationwide accounted for just 2.1 percent of all single-family home and condo sales in the first quarter, the second lowest level since 2000. The latest figure was down from 2.8 percent in the fourth quarter and from 2.6 percent a year ago.
–Buyers using Federal Housing Administration loans accounted for only 10 percent of all single-family home and condo purchases in the first quarter, the second-lowest level since 2008. The latest figure was down from 11.1 percent in the previous quarter and from 12.3 percent a year earlier.