Home seller profit margins hit post-recession peak

Driven by blanket rises in median home prices across the country, sellers realized the highest returns on investment since the Great Recession, according to Attom Data Solutions.

Home sellers gained an average of $75,971 over their original purchase price in the second quarter of 2020, an increase from $66,500 the prior quarter and from $65,250 the year before. The 36.3% profit was also a post-housing collapse high-water mark, compared to 34.5% quarter-over-quarter and 33.7% year-over-year.

Profit margins rose annually in 81 of the 104 largest U.S. housing markets. The largest gains came in Spokane, Wash., where the average sale price increased 14.8 percentage points to a 76% ROI. Columbus, Ohio, jumped 13 percentage points to 47% and Chattanooga, Tenn., rose 11.6 percentage points to 43.4%.

Of the 23 metro areas with decreases, the biggest annual drops came in Pittsburgh falling 7.7 percentage points to a 20.9% ROI, while Modesto, Calif., and Honolulu were each down 7.6 percentage points to 51.1% and 36.2%, respectfully.

"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, chief product officer at Attom Data Solutions, said in a press release. "Profit margins hit new records as prices kept climbing, with few indications that the impact of the virus would topple the market."

Housing values in the U.S. grew annually in the second quarter by about 6%. Prices rose in 97 of the 104 biggest markets with Detroit's 27.2% leading the way. It was followed by 17.5% in Boise, Idaho, 16.2% in Spokane, 14.4% in New Haven, Conn., and 13.3% in Birmingham, Ala.

"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 said. "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. But the second quarter results showed continuing strength in most parts of the nation."