The typical home sale profit of $75,971 in the second quarter of 2020 reflected a 36.3 percent return on investment (ROI) from the original price, up from 34.5 percent ROI the previous quarter, according to Attom Data Solutions’ most recent quarterly U.S. home sales report. That number was also up from 33.7 percent year-over-year, and marked a new high in raw profits since the housing market started its recovery from the Great Recession in 2012.
The new data arrives just as median home prices have continued to rise across the country, regardless of the significant economic damage the coronavirus pandemic has inflicted across the U.S.
Todd Teta | ATTOM Data Solutions
“The housing market across the United States pulled something of a high-wire act in the second quarter, surging forward despite the encroaching economic headwinds resulting from the coronavirus pandemic,” Todd Teta, Attom’s chief product officer, said in a statement. “Profit margins hit new records as prices kept climbing, with few indications that the impact of the virus would topple the market.”
“No doubt, a lot of the ongoing prosperity resulted from gains seen before the pandemic started racing through the country in February and March,” Teta added. “Indeed, there have been recent signs of prices flattening out or dropping across significant parts of the country, and the economic toll from the virus continues to be a major issue.”
In 78 percent of metro areas analyzed, profit margins (the percent change between median purchase and resale prices) rose from Q2 2019 to Q2 2020.
The largest year-over-year increases in profit margins were in Spokane, Washington (rose from 61.2 percent to 76 percent); Columbus, Ohio (34 percent to 47 percent); St. Louis (19.9 percent to 31.4 percent); Chattanooga, Tennessee (rose from 31.9 percent to 43.4 percent); and Indianapolis (30.5 percent to 41.9 percent).
Out of the 22 percent of metro areas where profit margins decreased year-over-year, Pittsburgh (down from 28.6 percent to 20.9 percent); Modesto, California (58.7 percent to 51.1 percent); Honolulu (43.8 percent to 36.2 percent); Greeley, Colorado (41.5 percent to 35.4 percent); and Naples, Florida (22.1 percent to 16.7 percent) showed the greatest declines in profit margins.
In 93 percent of metro areas analyzed in Attom’s report (metros of at least 1,000 single-family and condo sales in the second quarter), median home prices rose year-over-year during the second quarter. The average annual increase in median home price was by about 6 percent.
Detroit (median home price rose by 27.2 percent); Boise, Idaho (up 17.5 percent); Spokane, Washington (up 16.2 percent); New Haven, Connecticut (up 14.4 percent) and Birmingham, Alabama (up 13.3 percent) saw the greatest annual increases in median home prices during Q2 2020.
Nationwide, homeowners who sold their home during the second quarter had owned their homes for an average of 7.95 years, a slight increase from 7.85 years the quarter before, but nearly the same as the 7.96 years of homeownership tenure reached in Q4 2019.
However, 55 percent of metro areas did see declines in average homeowner tenures, with the greatest declines in Torrington, Connecticut (down 10.9 percent); Yakima, Washington (down 9.8 percent); Gainesville, Florida (down 7.2 percent); Honolulu (down 6.8 percent); and Springfield, Massachusetts (down 6.4 percent).
Cash sales dropped to their lowest point in 13 years during the second quarter to 23.4 percent of single-family home and condo sales, down from 26.6 percent in Q1 2020 and from 24.4 percent in Q2 2019.
Likewise, distressed sales (bank-owned sales, third-party foreclosure auction sales and short sales) hit a 14-year low during this quarter at 8 percent of all U.S. single-family home and condo sales, down from 9.7 percent the previous quarter and 10.9 percent the previous year.
Large metros with a population of at least 1 million that reported the highest percentage of distressed sales included Hartford, Connecticut (18.8 percent of sales); Providence, Rhode Island (17.3 percent); Baltimore (13.8 percent); Cleveland (13.1 percent); and St. Louis (12.3 percent).
Metros with the smallest portion of distressed sales (all of which have populations of at least 1 million) included Austin, Texas (3.3 percent of sales); Seattle (3.6 percent); San Francisco (4 percent); San Diego (4.3 percent) and Dallas (4.4 percent).
During the second quarter of 2020, institutional investors dropped to 1.4 percent of all single-family home and condo sales from 2.2 percent the previous quarter, reaching a low since at least 2000.
Across the U.S., buyers using Federal Housing Administration (FHA) loans rose slightly during this quarter from 12.3 percent of all single-family home and condo purchases in Q1 2020 to 12.5 percent of those purchases in Q2 2020. That number also marked an increase from the 11.6 percent of homebuyers using these loans in Q2 2019.