Home sellers are still seeing big profits, but profit margins weren’t as robust as one might expect during the second quarter.
Median single-family and condo sales in the second quarter of 2021 generated a profit of $94,500, according to data from ATTOM, a national property database. That’s up from $90,000 in the first quarter of 2021 and up significantly from $60,572 in the second quarter of 2020.
But while profits are up in absolute terms, the profit margin — the difference between median purchase and resale prices — declined from about 48.4% in the first quarter of 2021 to 44.9% in the second quarter, marking what ATTOM called a “rare decline” during a time of the year that normally produces the best returns for home sellers.
The last time the return on investment dropped during the second quarter of any year was 2008, according to ATTOM.
Meanwhile, the national median home price hit another record in the second quarter of 2021, reaching $305,000, up 11% from the first quarter of 2021 and up 22% from the $250,000 it reached during the second quarter of 2020, according to ATTOM.
The drop in ROI came because, despite high home sale prices, the gains were smaller because recent sellers have paid significantly more to purchase their homes in the first place.
“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,” said Todd Teta, chief product officer at ATTOM, in a press release accompanying the data. “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.”
Homeowners selling their homes in the second quarter of 2021 owned their homes for an average of 6.3 years, down from 7.21 years in the first quarter of 2021 and down from 7.6 years in the second quarter of 2020. That 6.3 year tenure is the shortest time between purchases and resale since the first quarter of 2013, according to ATTOM.
Profit margins year over year jumped the most in Boise City, Idaho, which saw an increase from 59.6% in the second quarter of 2020 to 1245.3% in the second quarter of 2021. Charlottesville, Va., also saw a big jump in profit margins, from 20.2% in the second quarter of 2020 to 83.6% in the second quarter of 2021.
Profit margins dropped in San Jose, California, which saw a decrease from 85.6% in the second quarter of 2020 to 67.4% in the second quarter of 2021. Las Vegas also fell from 45.8% to 30.5% and Kansas City, Missouri, fell from 41.4% to 26.5%.
But the quarter-by-quarter drop in profit margins — even if they remain high — could be another indicator that the housing market may be hitting a turning point, according to various metrics. While the median price for actively listed houses jumped 12.7% in June 2021 over the same time in 2020, to $385,000, there is also data showing that more homes have sold and inventory has increased.
Meanwhile, Covid-19 has changed how homes are marketed and listed. In 2019, the most popular home features and amenities in home listings were granite countertops, hardwood floors and stainless steel appliances. But now, after 18 months of a global pandemic, the top amenities listed in homes for sale were garages, walk-in closets and full bathrooms, reflecting the changing desires of potential buyers.
Those findings came from Point2homes.com, a Yardi Matrix company, which analyzed 43 million words from across all listings in the United States that were active in April 2021 and ranked the keywords according to the number of times they appeared in home descriptions.