U.S. Home Sale Profit Margins Hit Another Record High in 2022
Home profits rise 56 percent in Q2, biggest quarterly gain in a decade
Based on ATTOM’s newly released second-quarter 2022 U.S. Home Sales Report, profit margins on median-priced single-family home and condo sales across the United States hit another new record of 55.5 percent following the largest quarterly gain in a decade.
On the heels of a lackluster first quarter of 2022 that suggested possible weakness in the nation’s long-running housing market boom, the latest typical profit margin was up from 48.3 percent in the first quarter of 2022 and 42.9 percent in the second quarter of 2021. It was more than 20 points above the 32 percent 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 Rick Sharga, executive vice president of market intelligence at ATTOM. “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.”
While profit margins routinely go up during the Spring home-buying season, the latest spike of more than seven percentage points marked the largest quarterly gain since at least 2008. The year-over-year 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 2002, after dipping slightly in the early months of the year. The typical single-family home and condo sale across the country generated a gross second-quarter profit of $123,869, up 19 percent from $103,750 in the first quarter of 2022 and up 38 percent from $90,000 a year earlier.
The second-quarter records for 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 – the 10th straight quarterly increase. The latest median value was up 8.8 percent from the first quarter of 2022 and 15.3 percent from the second quarter of 2021.
The second quarter profit figures showed 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 a year ago, reaching almost 6 percent for a 30-year fixed rate loan, making affordability a challenge for many potential homebuyers. These higher rates, coupled with rising home prices, the highest U.S. inflation rates in 40 years, and 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 anew in the second quarter, after a first quarter that saw a rare dip in investment returns.
Profit margins rise quarterly and annually across most of the U.S.
Typical profit margins – 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 percent) of the 183 metro areas around the U.S. with sufficient data to analyze. They were up annually in 174 of those metros (95 percent). 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 profit margins came in the metro areas of Fort Myers, FL (margin up from 47.1 percent in the second quarter of 2021 to 90.9 percent in the second quarter of 2022); Naples, FL (up from 40.4 percent to 83.1 percent); Ocala, FL (up from 44.4 percent to 85.2 percent); Gulfport, MS (up from a loss of 6.5 percent to a gain of 30.8 percent) and Yuma, AZ (up from 42.7 percent to 77.8 percent).
The biggest annual profit-margin increases in metro areas with a population of at least 1 million in the second quarter of 2022 were in Orlando, FL (margin up from 36.4 percent to 67.6 percent); Tampa, FL (up from 47.4 percent to 76.3 percent); Miami, FL (up from 38.9 percent to 66.8 percent); Cleveland, OH (up from 21.4 percent to 42.1 percent) and Jacksonville, FL (up from 43.4 percent to 63.4 percent).
Homeownership tenure remains historically low
Homeowners who sold in the second quarter of 2022 had owned their homes an average of 5.87 years. That was up from 5.71 years in the first quarter of 2022, but down from 6.31 years in the second quarter of 2021. The latest figure was the second-shortest average time between purchase and resale since the first quarter of 2012.
Tenure decreased from the second quarter of 2021 to the same period this year in 88 percent of metro areas with sufficient data. They were led by Lakeland, FL (tenure down 61 percent); Salem, OR (down 51 percent); Yakima, WA (down 30 percent); Provo, UT (down 27 percent) and Eugene, OR (down 24 percent).
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, WA (9.6 years); Manchester, NH (9.13 years); Honolulu, HI (7.82 years); Bridgeport, CT (7.76 years) and New Haven, CT (7.52 years).
The smallest average tenures among second-quarter sellers were in Lakeland, FL (1.25 years); Memphis, TN (3.51 years); Tucson, AZ (3.79 years); Knoxville, TN (4.28 years); and Cleveland, OH (4.33 years).
Source: THE WORLD PROPERTY JOURNAL
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