ATTOM released its 2021 U.S. Home Sales Report showing that profit margins for sellers took an unusual dip in the second quarter, although they were far above where they were last year.
The typical single-family home and condo sales across the U.S. for the second quarter of 2021 generated a profit of $94,500, up from $90,000 in the first quarter. However, the profit margin on median priced homes and condominiums (meaning the return on investment from selling the unit) declined from 48.8% in the first quarter to 44.9% in the second quarter. The last time typical returns on investment dropped nationally during the second quarter period was in 2008.
Although the national median home price hit another record high in the second quarter of 2021, reaching $305,000, profit margins for sellers are reduced. This strange trend is occurring because price gains – high as they were – were smaller than increases that recent sellers had been paying when they originally bought their homes. The price gap between latest price gains and earlier increases caused a dip in sellers' profit margins.
Conversely, profit margins rose annually in more than 80% of the metro areas around the U.S. and quarterly in slightly more than half. The biggest annual increases in profit margins by metro were Boise City, ID (up from 59.6% in the second quarter of 2020 to 124.3% in the second quarter of 2021); Charlottesville, VA (up from 20.2% to 83.6%); Scranton, PA (up from 34.9% to 80.9%); Claremont-Lebanon, NH (up from 18% to 57.3%) and Bellingham, WA (up from 60.8% to 98%).
Profit margins dropped year-over-year in only 37 of the 135 metros analyzed, equating to 19%, but declined quarterly in 86 metros (44%). San Jose, Las Vegas, Kansas City and Los Angeles were among the metros with the largest drop in profit margins, including New York, NY.
"Prices and profits from the second quarter painted yet another picture of a housing market in high gear – except for one thing,” said Todd Teta, chief product officer at ATTOM. “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. 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 virus pandemic.”
For more information, view ATTOM’s Historical Median Home Sales Prices Chart.
