Profits from sales of median-price homes fell slightly last year, but are still pretty huge
Profits from sales of median-price homes fell slightly last year, but are still pretty huge
People who sold a median-price home last year made more than $120,000 in profit on a typical sale, according to a new report out today from the property data company ATTOM.
That’s actually slightly less than what sellers made in 2022, and last year was the first time that number has dropped in more than a decade. But it’s also double the profit homeowners made just five years ago.
Nothing about the housing market of the last few years has been sustainable.
“We’ve never had such hot, fast price growth in a very short amount of time. It’s completely abnormal,” said Logan Mohtashami, lead analyst at HousingWire. “We went from, on average, three to four or five percent home price growth, to 44% home price growth in four years.”
And that rate of growth was never going to last. But, while it did, it made many homeowners a lot of money.
“The fact that profits on homes are still really high, I really think that’s been the primary reason why the housing market has been so resilient,” said Lisa Sturtevant, chief economist at Bright MLS.
Sturtevant says even as mortgage rates hit a 23-year high last year, people kept buying homes.
“And I think a lot of it was frankly that homeowners had a tremendous amount of equity that they were able to roll into the purchase of their next home,” she said.
Even now that the huge run-up in prices and equity has slowed, Sturtevant says most homeowners are still in a good financial position.
Jason Ward at RAND says the fact that so many people have built so much wealth this way has also fundamentally changed our society’s relationship to homeownership.
“Thirty, forty, fifty years ago, people just sort of thought of like, ‘Can I afford this home? Is that where I want to live?’ If yes and yes, then you’re going to buy it. And that’s good,” said Ward. “Now you have people buy houses and think about it as sort of a gamble on wealth rather than a place to live.”
And he says that is having a knock-on effect on the housing market as a whole.
“When your housing value rises and rises and rises and it becomes this incredibly important part of your wealth, then you’re also going to be a lot less friendly to, you know, say, policies that might encourage housing growth around you,” said Ward.
Because you might be worried that building more houses will hurt the value of yours.
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