U.S. home sale profit margins fell in the second quarter of 2021 but were still far higher than they
Typical single-family home and condo sales across the United States during the second quarter of 2021 generated a profit of $94,500, up from $90,000 in the first quarter of 2021 and from $60,572 in the second quarter of 2020, according to a report
The return on investment that sellers made on median-priced houses or condominiums 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 seen a year earlier, the rare decline comes at a time of year which usually produces some of the best returns for sellers.
Profits dropped over the period because price gains were smaller than increases that recent sellers had been seeing over what they originally bought their homes for, Todd Teta, chief product officer at ATTOM said.
“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,” he added. “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 pandemic.”
The report analyzed data from 195 metro areas around the U.S. that had at least 1,000 single-family home sales in the second quarter of 2021 and a population of at least 200,000.
Profit margins rose from the second quarter of 2020 to the second quarter of 2021 in 158, or 81%, of 195 metro areas analyzed.
The biggest annual increases in profit margins came in the metro areas of Boise City, Idaho, up from 59.6% in the second quarter of 2020 to 124.3% in the second quarter of 2021.
The biggest annual profit-margin increases in metro areas with a population of at least 1 million were in Rochester, NY, up from 31% in the second quarter of 2020 to 64.8% in the second quarter of 2021.
Annual profit margins decreased in 37, or 19%, of the 195 of the metro areas analyzed.
The biggest annual decreases were seen in San Jose, California, down from 85.6% in the second quarter of 2020 to 67.4% in the second quarter of 2021.
The last time typical returns on investment dropped nationally during any second-quarter period was in 2008.
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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.
