LOS ANGELES (AP) — Despite a housing slump going back more than a year, soaring home prices in recent years and a stubborn shortage of properties on the market are helping to drive solid profit gains for sellers.
The profit margin on median-priced single-family homes and condos nationally soared to 59% in the July-September quarter, according to a report released Thursday by real estate information provider Attom. The profit margin in a home sale represents the percent difference between the original purchase price and what it was sold for.
“Prices and profits around the U.S. got another boost over the summer as the housing market continued recovering from last year’s setbacks,” said Attom CEO Rob Barber.
The third quarter increase followed profit margin gains of 56.6% in the April-June period and 55.2% in the January-March quarter.
Even so, home sellers in the third quarter didn’t fare as well as in the same quarter last year, when the profit margin on a median-priced home was 62%, just below the all-time high on records going back to 2008.
Home prices have remained resilient even as the housing market has slowed sharply under the weight of surging mortgage rates, which have held above 7% since August, crushing homebuyers’ purchasing power.
The sharply higher home loan borrowing costs have discouraged many homeowners who locked in rates around 3% just two years ago from selling now, limiting the already near historic-low level of homes on the market. That, in turn, has stoked competition for fewer homes, keeping prices from falling significantly.
The nationwide median home price rose 2% in the third quarter to an all-time high $350,000, according to Attom’s data.
By some measures, home prices soared more than 40% during the pandemic as mortgage rates hit rock bottom, expanding how much homebuyers could afford to borrow. That led to bidding wars and homebuyers paying sometimes hundreds of thousands of dollars above the seller’s asking price.
Many homeowners who bought their home before this superheated period in the market, are in the position to potentially reap a hefty profit margin should they sell now. And the longer they owned their home, the more the potential profit margin.
Homeowners who sold in the third quarter had owned their homes an average of 7.86 years, which marked the second highest point since 2000, according to Attom.
Still, when looking only at seller gross profits — not the profit margin — their gains are bit more modest. The median U.S. home sale gross profit in the third quarter was $129,900, a 3.2% gain compared to the same quarter last year and a 5% improvement since the second quarter, Attom found.
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