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Home sales profits take dive in second quarter

The housing oven is still hot but the stove is cooling off for home sellers. In a housing sales report from ATTOM, profit margins for home sellers dropped in the second quarter, marking a rare decline during a time that usually produces some of the best returns for sellers.

The profit margin on the median-priced house or condominium dropped from 48.4% in the first quarter of this year to 44.9% in the second quarter. While the latest margin remained 13 points above the 32% level recorded a year earlier.

Despite that, single-family home and condo sales across the United States during the second quarter of 2021 generated a profit of $94,500. That was up from $90,000 in the first quarter of 2021 and from $60,572 in the second quarter of 2020, according to Attom.

Todd Teta, chief product officer at ATTOM, said experts didn’t expect shaky profit margins. 

“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,” Teta said. “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.”

It’s a mixed bag of high, but-reduced, profit margins. The national median home price hit yet another record in the second quarter of 2021, reaching $305,000. That was up 11% from $275,200 in the first quarter of 2021 and 22 percent from $250,000 in the second quarter of 2020. The annual price surge marked the largest since at least 2006 and was two to four times greater than increases seen just a year ago. 

Some 98% of home prices rose in metropolitan areas from the first to second quarter. But investment returns only rose 56%.   

Metro area prices rise 

Median home prices in the second quarter of 2021 surpassed values from last year. Nationally, the median price of $305,000 in the second quarter was up 10.8% from $275,200 in the first quarter of 2021 and 22% from $250,000 in the second quarter of last year. 

The biggest year-over-year increases in median home prices during the second quarter of 2021 came in Barnstable Town, Massachusetts (up 53%); East Stroudsburg, PA (up 46%); Worcester, Massachusetts (up 42%); Dover, Delaware (up 38%) and Brunswick, Georgia (up 34%).

When West goes high, the south goes low 

The West continued to have the largest profit margins on typical home sales around the country, with 12 of the top 15 returns on investment in the second quarter of 2021 from among the 195 metropolitan areas with enough data to analyze. They were led by Boise City, Idaho (124.3% return) Bellingham, Washington (98%); Spokane, Washington (84.2%); Salem, Oregon (84%), and Charlottesville, Virgina (83.6%).

Thirteen of the 20 smallest margins were in the South region. The lowest were in Columbus, Georgia (minus 5.8%); Shreveport, Louisiana (3.6%), Lafayette, Louisiana (8.1%); Rockford, Illinois (11.4%) and Myrtle Beach, South Carolina (11.7%).

Cash sales up 

All-cash purchases accounted for 34% of all single-family house and condo sales in the second quarter of 2021. The second-quarter 2021 number was up from 31.7% in the first quarter of 2021 and from 20.6% in the second quarter of last year.

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