It's no secret that the residential real estate market is on fire. Record-low interest rates and a nationwide housing shortage have pushed home prices to new highs. However, up until this point, profitability on the sale of a home wasn't necessarily running alongside it. Competition in the marketplace, particularly among fix-and-flip real estate investors, meant returns were actually falling. But according to ATTOM Data Solutions' latest home profit report, that could all be changing.
How much money are sellers making today?
According to ATTOM Data's home profit report, which pulls data from Q3 2021 home sales, the profit margin for median home sales was 47.6% -- a new record, even surpassing the profits gained in 2012 and 2013 after the Great Recession.
After the market crashed in 2008 and 2009, investors and homebuyers were able to purchase homes for cheap. This allowed home profit margins to reach new highs in 2012 and 2013, but it seems today's market is even hotter. And this insane home price growth was achieved in far less time than ever before.
Profit margins increased in roughly 90% of the markets tracked by ATTOM Data Solutions, with sellers seeing an average profit of $100,178 on the sales of their homes in Q3, a 45% increase for Q3 2020. Homes are also being owned for a shorter time. Q3 2021 resulted in the shortest length of time between the purchase of a home and its sale since the first quarter of 2013. The markets with the largest annual increases in profits were:
- Boise City, Idaho (up 68.9%)
- Claremont-Lebanon, New Hampshire (up 52.7%)
- Augusta, Georgia (up 37%)
- Bellingham, Washington (up 36.1%)
- Raleigh, North Carolina (up 36.6%)
- Detroit, Michigan (up 25%)
- Rochester, New York (up 39.4%)
- Austin, Texas (up 23.3%)
- Pittsburgh, Pennsylvania (up 21.8%)
But not all markets are seeing the same growth or demand. The markets with the greatest annual decrease in profit margins were:
- Salem, Oregon (down 75.6%)
- Brownsville, Texas (down 24.1%)
- Kansas City, Missouri (down 18.5%)
- San Jose, California (down 15.2%)
- McAllen, Texas (down 13.5%)
Great time to sell, bad time to buy
The report also found that cash sales continue to drive today's housing market, with all-cash sales making up 34% of all home sales in Q3 2021 -- an eight-year high. Preferable buying conditions continue to draw new homebuyers to the market despite record-high home prices. Meaning right now is a profitable and ideal time to sell a property. But buying a property right now isn't easy. Buyers in today's market continue to face high prices and possibly bidding wars. The question remains, how long will this last?
There is a lot of discussion about where real estate prices will go in 2022, and while a lot of signs point to a pullback, there are several factors that could make the price growth continue. For now, real estate investors, home sellers, and even fix-and-flippers should benefit from some boosted returns when it comes time to sell. Those who want to tap into a property's equity without selling outright always have the option to refinance or draw from the property's home equity line of credit (HELOC).