Big Jump in Home Seller Profits

ATTOM’s 2021 year-end report on the housing market found it was far from a typical year. The company noted a number of recent or all-time highs and lows were set, including homeowner tenure, institutional investment, and home sellers’ return on investment (ROI).

Homeowners who sold their houses in 2021 realized a median profit of $94,092 according to data released by ATTOM. That was a 45.3 percent gain, up from $64,931 and 33.6 percent in 2020. The profit, based on median purchase and sales prices, was the highest level of profitability since at least 2008 when ATTOM started tracking the data. Profits rose in 90 percent of the 173 metropolitan housing markets with enough data to analyze.

Both raw profits and ROI have improved nationwide for 10 straight years, but the 2020 to 2021 gain in ROI – up nearly 12 percentage points – was the largest annual increase since 2013. The increased profitability shouldn’t be a surprise. The national median home price gained 17 percent in 2021 to $301,00, also an annual record.

ATTOM said there were a few signs late last year that prices could flatten out in 2022, including declining affordability, lower investor profits and rising foreclosure activity. Added to those was rising inflation and likely increases in mortgage rates this year. The report adds that the current imbalance in demand and supply suggests that there is room for at least some additional price gains.

“What a year 2021 was for home sellers and the housing market all around the U.S. 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 stifle them,” said Todd Teta, chief product officer at ATTOM. “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. 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.”

ROI was highest among metropolitan areas along the West Coast. Boise, Idaho led with ROI of 121.8 percent. Spokane and Bremerton Washington were next at 86.5 and 82.7 percent. All but four of the 173 metro areas ATTOM studied saw median prices increase in 2021 and 124 saw them rise 10 percent or more. The four where prices fell were Gulfport, Mississippi (down 4.9 percent); Peoria, Illinois (-1.8 percent); Beaumont, Texas (-1.4 percent); and Kansas City, Missouri (-0.7 percent).

Those homeowners who sold in the fourth quarter of last year had owned their homes an average of 6.14 years. This was down from 6.34 years in the third quarter of 2021 and from 8.03 years in the fourth quarter of 2020. It was the shortest average tenure since the first quarter of 2012. Seller tenures retreated year over year in 102, or 95 percent, of the 107 metro areas with a population of at least 200,000 and sufficient data.

Another anomaly in 2021 was the percentage of all-cash sales. ATTOM said nearly one in three transactions during the year, 30.3 percent, was all cash, the highest level since 2015 and considerably higher than the 22.8 percent and 25 percent of such sales in 2020 and 2019. The highest level in ATTOM’s records were 38.5 percent in both 2011 and 2012, the two years following the peak of the foreclosure crisis.

Institutional investors are continuing to purchase residential properties, accounting for 6.9 percent of single-family home and condo sales. It was the highest level since 2013 and was up from 2.7 percent in 2020.

FHA financing fell to its lowest level since 2007. Only one of every 12 single-family and condo transactions, 8.4 percent, involved those loans. That was down from 11.9 percent in 2020 and 12 percent in 2019.