A seller's dream?

Profit margins on single-family homes soar to highest levels since 2012 Great Recession, report shows

A seller's dream?

Seller profits in the US for single-family home and condos soared by 48% during the third quarter - the highest level in a decade, according to a new report by property analytics firm, ATTOM.

According to the company’s Q3 2021 US Home Sales Profit report, margins on median-priced, single-family home and condo sales across the country increased to the highest level since the end of the 2012 Great Recession.

The latest profit level, up from $88,800 in Q2 and from $69,000 in the third quarter of 2020, also represented a new high.

ATTOM’s report showed that the typical home sale across the country during Q3 generated more than $100,000 in profit after the national median home price jumped by 16% to $310,500.

This was up from $300,000 in Q2 and from $268,000 during the third quarter of 2020.

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ATTOM said it was yet another sign of the strength of the US housing market, despite the fact the country’s economy had “only gradually” recovered from the widespread damage caused by the COVID pandemic, showing that the “investment-return increases marked the biggest quarterly jump since 2014 and the biggest annual surge since at least 2008”.

The national median home price also increased by 3.5% compared to the previous quarter and by 15.9% compared to the same period last year. The annual price surge marked the fifth straight quarter with year-over-year increases of at least 10%.

The report concluded that the US housing market was “so hot” in Q3 that median home prices rose annually in almost all US metropolitan areas.

The report added: “Amid rock-bottom interest rates and worries about living in congested virus-prone parts of the country, a glut of buyers has been chasing a tight supply of homes for sale over the past year and a half, raising demand and spiking prices.”

Significantly, the report also said that cash sales were at six-year high, with all-cash purchases accounting for 34% of all single-family house and condo sales - the highest level since 2015.

The largest profit margins were in the West and the smallest in the South, while the biggest annual increases came in the metro areas of Boise City, Idaho (margin up to 130.3% in Q3 from 61.4% during the same period last year); Claremont-Lebanon in New Hampshire; Augusta (Georgia); and Raleigh (North Carolina).

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Todd Teta, chief product officer at ATTOM, noted that prices and seller profits had hit new highs since the market started coming back from the Great Recession in 2012.

He said: “The third quarter of this year marked another period in a banner year for a housing market boom that’s steaming ahead through its 10th year.”

Although Teta flagged up signs of “a possible slowdown in recent months” as the country entered the quiet Fall and Winter seasons amid the ongoing concerns about the pandemic, he remained highly optimistic, saying “the market engine seems to have nothing but high-octane gas in the tank”.

By contrast, Federal Housing Administration (FHA)-financed purchases remained almost at a 14-year low. Across the country, buyers using (FHA) loans made up only 8.3% of all single-family home and condo purchases during this period, representing the second-lowest level since 2007 and highlighting the current affordability crisis in the US housing sector.

In addition, homeownership tenure remained at an eight-year low, with homeowners who sold during Q3 having owned their homes an average of 6.31 years, almost unchanged compared to the second quarter and down by more than a year from 7.85 years in the third quarter of 2020.

The last two quarters marked the shortest times between purchase and resale since the first quarter of 2013.