Sellers in today’s housing market are raking in significant profits, according to ATTOM’s Year-End 2021 U.S. Home Sales Report, which shows that, nationwide, home sellers realized a profit of $94,092 on a typical home sale in 2021, up 45% from $64,931 in 2020 and up 77% from $55,000 in 2019.
Overall, profits rose in more than 90% of the housing markets, based on median purchase and resale price, and marked the highest level in the United States since at least 2008.
"What a year 2021 was for home sellers and the housing market all around the U.S.,” said Todd Teta, chief product officer at ATTOM. “Prices went through the roof, kicking profits and profit margins up at a pace not seen for at least a decade. All that happened as the virus pandemic raged on, which actually helped drive the increases instead of stifling them.”
The $94,092 profit represents a 45.3% return on investment (ROI) compared to the original purchase price, up from 33.6% last year and from 30.6% two years ago. The latest profit margin also stood out as the greatest since at least 2008.
Raw profits and ROI have grown steadily, nationwide, for the past decade; last year’s gain in ROI was up nearly 12 percentage points, and was the biggest annual increase since 2013. Profits skyrocketed once the national median home price increased 16.9% in 2021 to $301,000, another annual record.
A surge of buyers who escaped the pandemic unscathed continued to flood the market in 2021, driven by historically low interest rates and the desire to escape congested urban life for perceived safety in a wide-open rural landscape. As buyers chased after the tight supply for homes, prices shot up even further and so did seller profits.
"Households that escaped job losses from the pandemic dove into the market, in large part as a response to the crisis. And the rising demand led the market boom onward,” Teta said. “No doubt, there are warning signs that the surge could slow down this year. But 2021 will go down as one of the greatest years for sellers and one of the toughest for buyers."
As Teta mentioned, there are a few signs that prices will flatten modestly. As affordability declines, investor profits fall and foreclosure activity rises, prices will begin to mediate. Even in an environment of rising inflation and increasing mortgage rates. Yet, the current imbalance between supply and demand means there is still room for price gains this year.
Profit margins on typical home sales increased from 2020 to 2021 in 150 of the 173 metro areas with sufficient data to analyze (87%).
The largest increases in investment returns came in Salisbury, MD (margin up 267.2%); Lafayette, LA (up 227.4%); Montgomery, AL (up 195.4%); Mobile, AL (up 179.9% and Augusta, GA (up 167.7%).
Among metropolitan areas with populations of at least 1 million in 2021, the largest ROI increases from 2020 to 2021 were in Raleigh, NC (ROI up 80.6%); Oklahoma City, OK (up 64.4%); Virginia Beach, VA (up 62.6%); Washington, DC (up 60.2%) and Chicago, IL (up 59.4%).
