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- Home prices and seller profits surged ahead in the second quarter after the first quarter saw a rare dip in investment returns.
- The latest spike in profit margins — of more than 7 percentage points — marked the largest quarterly gain since at least 2008.
- The annual gain of 13 points in the typical return on investment was one of the largest in the past decade.
- The national median home price hit a new high of $346,000 in the second quarter of 2022, marking the 10th-consecutive quarterly increase.
ATTOM recently released its second-quarter 2022 U.S. Home Sales Report, which shows that profit margins on median-priced single-family home and condo sales across the United States hit another record of 55.5%, following the largest quarterly gain in a decade.
After a lackluster first quarter that suggested weakness in the nation’s long-running housing market boom, the latest typical profit margin was up from 48.3% in the first quarter and 42.9% in the second quarter of 2021. The profit margin for the second quarter of this year is more than 20 points above the 32% figure from the second quarter of 2020.
“Home sellers in the second quarter continued to benefit from the rapid growth in home-price appreciation the country has experienced over the past few years,” said ATTOM Executive Vice President of Market Intelligence Rick Sharga. “While price growth may slow down as higher mortgage rates dampen demand from prospective homebuyers, home sellers should continue to profit from the record $27 trillion in homeowner equity in today’s market.”
Although profit margins typically go up during the Spring homebuying season, the latest spike of more than 7 percentage points marked the largest quarterly gain since at least 2008. The annual gain of 13 points in the typical return on investment was one of the largest in the past decade.
Gross profits also hit new highs in the second quarter of 2022, after dipping slightly in the early months of the year. The typical single-family home and condo sales across the country generated a gross second-quarter profit of $123,869 — up 19% from $103,750 in the previous quarter and up 38% from $90,000 a year earlier.
Record gross profits and profit margins came as the national median home price hit a new high of $346,000 in the second quarter of 2022, marking the 10th-consecutive quarterly increase. The latest median value was up 8.8% from the first quarter of 2022 and 15.3% from the second quarter of 2021.
These record-breaking profits illustrate how strong the nation’s housing market prices remained despite rising economic uncertainty and home-mortgage rates that have surged this year. Average mortgage rates have nearly doubled from last year, reaching almost 6% for a 30-year fixed-rate loan, making affordability a challenge for many potential homebuyers.
Higher rates coupled with rising home prices and the highest U.S. inflation rates in 40 years, as well as soaring food and fuel prices, are all headwinds threatening to slow down what has been a white-hot housing market over the past few years. Still, home prices and seller profits surged ahead in the second quarter after the first quarter saw a rare dip in investment returns.
Profit Margins By Metro
Typical profit margins — meaning the percent change between median purchase and resale prices — increased from the first quarter of 2022 to the second quarter of 2022 in 162 (89%) of the 183 metro areas around the U.S. They were up annually in 174 of those metros (95%). Metro areas were included if they had at least 1,000 single-family home and condo sales in the second quarter of 2022 and a population of at least 200,000.
The biggest annual increases in seller profit margins came in Fort Myers, Fla. (margin up from 47.1% in the second quarter of 2021 to 90.9% in the second quarter of 2022); Naples, Fla. (up from 40.4% to 83.1%); Ocala, Fla. (up from 44.4% to 85.2%); Gulfport, Miss. (up from a loss of 6.5% to a gain of 30.8%) and Yuma, Ariz. (up from 42.7% to 77.8%).
In metro areas of at least 1 million in the second quarter of 2022 were in Orlando, Fla. (margin up from 36.4% to 67.6%); Tampa, Fla. (up from 47.4% to 76.3%); Miami, FL (up from 38.9% to 66.8%); Cleveland (up from 21.4% to 42.1%) and Jacksonville, Fla. (up from 43.4% to 63.4%).
Meanwhile, profit margins decreased annually in just 20 of the 183 metro areas analyzed (11%) and annually in only nine metro areas (5%). The biggest annual decreases were in Salem, Ore. (margin down from 87.5% in the second quarter of 2021 to 55% in the second quarter of 2022); Hilo, Hawaii, (down from 140.8% to 110.5%); Boise, Idaho (down from 122.8% to 100.1%); Salisbury, Md. (down from 57.1% to 48.6%) and Albany, N.Y. (down from 35.4% to 28.3%).
The largest annual decreases or smallest gains in profit margins among metro areas with a population of at least 1 million came in Atlanta (down from 48.9% to 42.8 %); Sacramento, Calif. (up from 61.5% to 62.5%); San Francisco (up from 81.5% to 83.1%); Washington, D.C. (up from 44.9% to 46.7%), and Boston (up from 49.8% to 52.9%).
Home Prices By Metro
Median home prices in the second quarter of 2022 exceeded values from the prior quarter in 181 (96%) of the 183 metro statistical areas with enough data to analyze and were up annually in 10 of those metros (96%). Nationally, the median price of $346,000 in the second quarter was up from $318,000 in the first quarter of 2022 and $300,000 in the second quarter of last year.
The biggest annual increase in median home prices during the second quarter of 2022 were in Gulfport, Miss. (up 55.3%); Naples, Fla. (up 36%); Lakeland, Fla. (up 35.7%); Fort Myers, Fla. (up 31.7%) and Port St. Lucie, Fla. (up 29.8%).
The largest annual increase in metro areas with a population of at least 1 million in the second quarter of 2022 were in Tampa, FL (up 29.3%); Orlando (up 25.5%); Phoenix (up 25.3%); Nashville (up 24.3%) and Charlotte, N.C. (up 24.2%).
Home prices in the second quarter of 2022 hit or tied all-time highes in 168% of the 183 metro areas in the report, including New York City; Los Angeles; Chicago; Dallas, and Houston. The largest annual decreases and smallest increases in median prices were in Toledo, Ohio, (down 3.4%); Davenport, Iowa (down 2.7%); Peoria, Ill. (down 0.8%); Rockford, Ill. (up 2.1%) and Trenton, N.J. (up 2.2%).
The smallest annual increases in metro areas with a population of at least 1 million were in Honolulu (up 4.4%); Buffalo, N.Y. (up 5.5%); Virginia Beach, Va. (up 6.3%); Rochester, N.Y. (up 6.7%) and Baltimore (up 7.4%).
Homeowners who sold in the second quarter of 2022 owned their homes for an average of 5.87 years, up from 5.71 years in the previous quarter but down from 6.31 years in the second quarter of 2021. The latest figure marks the second-shortest average time between purchase and resale since the first quarter of 2012.
Tenure decreased annually in 88% of metro areas, led by Lakeland, Fla. (tenure down 6%); Salem, Ore. (down 51%); Yakima, Wash. (down 30%); Provo, Utah (down 27%) and Eugene, Ore. (down 24%).
Twenty of the 25 longest average tenures among sellers in the second quarter of 2022 were in the Northeast or West regions. They were led by Bellingham, Wash. (9.6 years); Manchester, N.H. (9.13 years); Honolulu (7.82 years); Bridgeport, Conn. (7.76 years) and New Haven, Conn. (7.52 years).
All-Cash Deals By Metro
Nationwide, all-cash purchases accounted for 35.4% of all single-family home and condo sales in the second quarter of 2022, the highest level since the first quarter of 2014. The latest figure was up from 34.6% in the first quarter of 2022 and from 31% in the second quarter of last year.
“Cash buyers have continued to account for a higher percentage of home sales than usual, probably due in part to homeowners selling properties in high cost states and using the proceeds to buy a home with cash in lower cost areas,” Sharga noted. “With mortgage rates almost doubling over the past year and the cost of financing soaring, cash buyers will be in an even stronger position of competitive advantage for the foreseeable future.”
Among metro areas with a population of at least 200,000 and sufficient cash-sales data, those where cash sales represented the largest share of all transactions in the second quarter included Naples, Fla. (57.2%); Utica, N.Y. (52.7%), Youngstown, Ohio (52.6%); Atlanta (51.3%) and Salisbury, Md. (51%). Those where cash sales represented the smallest share of all transactions in the second quarter included Gainesville, Ga. (5.1% of all sales); Athens, Ga. (14.4%); Lincoln, Neb. (16.2%); San Jose, Calif. (18%) and Des Moines, Iowa (18.1%).
Institutional Investors On The Rise
Institutional investors accounted for 6.2%, or one in every 16 single-family purchases in the second quarter. That was the same portion as in the second quarter of 2021, but up from 4.4% in the first quarter of 2022.
Those with the largest percentages of sales to institutional investors in the second quarter of 2022 were Arizona (16.7% of all sales), Georgia (13.1%), Nevada (13%), North Carolina (9.9%), and Tennessee (8.9%). States with the smallest levels of sales to institutional investors in the second quarter of 2022 included Maine (1%), New Hampshire (1%), Hawaii (1.2%), Louisiana (1.6%), and Vermont (1.6%).
Buyers using Federal Housing Administration (FHA) loans comprised only 6.7%, or one in every 15, of all single-family home purchases in the second quarter of 2022 — the smallest portion since the fourth quarter of 2007. That’s down 7.3% from the previous quarter and 7.9% from a year ago.
“FHA borrowers — and borrowers with VA loans — have been at a significant disadvantage in a housing market characterized by historically short sales cycles and near-record levels of cash buyers,” Sharga added. “If days on market continue to increase, leveling the playing field a little bit for these borrowers, we could see the volume of homes purchased by FHA and VA borrowers climb back up to more normal levels.”