Home Seller Profits Soar to Highest Rates Since 2005

ATTOM Data Solutions, Irvine, Calif., said home sellers nationwide in 2020 realized a home-price gain of $68,843 on the typical sale, up from $53,700 in 2019 and $48,500 two years ago.

The company’s Year-End 2020 U.S. Home Sales Report also said profits rose in more than 90 percent of housing markets, based on median purchase and resale prices, marking the highest level in the United States since at least 2005.

The $68,843 profit on median priced single-family homes and condos represented a 34.7 percent return on investment compared to the original purchase price, up from 29.4 percent last year and 27.2 percent in 2018, to the highest average home-seller return on investment since 2006.

The report said both raw profits and return on investment have improved nationwide for nine straight years. Last year’s gain in ROI – up more than five percentage points – marked the largest annual increase since 2017. Profits shot up as the national median home price rose 12.8 percent in 2020 to $266,250 – a record high.

Todd Teta, chief product officer at ATTOM Data Solutions, said the combination of rising profits and record prices came during a year when the national housing market fended off damage that afflicted wide swaths of the U.S. economy after the coronavirus pandemic of 2020 began spreading across the country in February. He said despite skyrocketing unemployment levels and millions of closed business did not deter the housing market, which continued its ninth consecutive year of growth, buoyed by low housing inventories that pushed home prices higher.

“Last year marked a unique year in the history of home prices and profits in the United States,” Teta said. “A once-in-a-century health crisis tore through much of the nation’s economy but seemed to have the opposite effect on the housing market. Demand remained strong as people who could afford the space and relative safety of single-family homes did just that, aided by super-low mortgage rates and a strong stock market. But they went after a narrowing supply of housing stock, so prices soared and so did seller profits. While it’s unclear how long that will last, in the annals of history, there will be few years recorded as better for sellers and more challenging for buyers.” 

The report said among 132 metropolitan statistical areas with a population greater than 200,000 and sufficient sales data, those in western states continued to reap the highest returns on investment, with concentrations on or near the West Coast. The top 10 metro areas with the highest ROIs on typical home sales were all in the West, led by in San Jose, CA (87.3 percent return on investments); Seattle (72.1 percent); Salem, Ore. (69.6 percent); Spokane, Wash. (69.2 percent) and San Francisco (68.2 percent).

The report said since the U.S. housing market began recovering in 2012 from the Great Recession of the late 2000s, the national median home price has risen 72.3 percent.

Additionally, the report noted homeowners who sold in the fourth quarter had owned their homes an average of 8.33 years, up from 7.98 years in the previous quarter and 7.96 years a year ago. The latest figure represented the longest average home-seller tenure since at least first quarter 2000, the earliest period of available data. Tenures were up, year over year, in 73, or 68 percent, of the 107 metro areas with a population of at least 200,000 and sufficient historical data.

Nationwide, all-cash purchases accounted for 23.5 percent of single-family home and condo sales in 2020, the lowest level since 2007. The latest figure was down from 25.2 percent in 2019 and 27 percent in 2018, and was well off the 38.4 percent peaks in 2011 and 2012.

Distressed home sales — including bank-owned (REO) sales, third-party foreclosure auction sales and short sales — accounted for 7.8 percent of all U.S. single-family home and condo sales in 2020, down from 11.1 percent in 2019 and 12.4 percent in 2018. The latest figure was less than one-quarter of the peak of 38.6 percent in 2011 and marked the lowest point since 2005.

Institutional investors nationwide accounted for 2.2 percent of all single-family home and condo sales in 2020 – the lowest level since at least 2000. The latest figure was down from 3.2 percent in 2019 and 3 percent in 2018.

Nationwide, buyers using Federal Housing Administration loans accounted for 11.9 percent of all single-family home and condo purchases in 2020, down from 12 percent in 2019 but up from 10.6 percent in 2018. Still, the 2020 percentage marked the second-lowest annual level since 2008.