In 2022, as the property market slowed, homeowners who decided to wait to sell their homes missed out on a bonanza and may have to settle for smaller gains if they choose to sell this year.
According to research issued Thursday by Attom, a real estate data tracker, the sale of a median-priced U.S. home resulted in a profit of $112,000 last year, a 21% rise from a year earlier and the greatest on records back at least to 2008.
Home seller profits probably peaked for this cycle in 2022, according to Rick Sharga, executive vice president of market intelligence at Attom.
The enormous profits for U.S. home sellers last year were driven by years of rising prices, ensuring outsized earnings even when prices fell sharply.
The more than ten years of rising home values should also help long-term homeowners who decide to sell this year, but the likelihood that home prices will continue to decline this year lays the framework for more modest gains.
According to Sharga, “median prices have fallen every month since mortgage rates doubled between January (2022) and October, and are anticipated to fall further in several markets nationwide in 2023, limiting profitability for property sellers.”
The housing market, which had been scorching hot during the first two years of the pandemic, was put on hold last year by rising mortgage rates and exorbitant prices.
Home sales plummeted because many people could no longer afford to buy a property due to increased borrowing costs and years of rising home prices.
However, homeowners who sold their homes last year nonetheless benefited financially from years of increases in home equity.
According to Attom, the return on investment for a median-priced U.S. home sold last year increased from 44.6% to a staggering 51.4%.
The Irvine, California-based company processed data from 157 MSAs (metropolitan statistical areas) with 200,000 or more residents.
I was comparing the sale of a U.S. home with the median price in 2022 to the prior median purchase price determined by the return on investment.
Since 2012, when the U.S. housing market was only starting to recover from the fall of the housing bubble and the Great Recession, the national median home price has more than doubled. According to Attom, it increased by 10% last year to reach an all-time high of $330,000.
Even that increase falls short of the 17.6% increase seen in 2021 when historically low mortgage rates still supported the home industry.
Last November, as the Federal Reserve raised its benchmark lending rate to slow the economy and contain inflation, the average rate on a 30-year mortgage reached a two-decade high of 7.08%.
Even though mortgage rates are about double what they were on average a year ago, they have decreased in recent weeks.