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This Week In Real Estate – August 1, 2021

Central Oregon Real Estate - This Week In Real Estate

U.S. Home Profit Margins Remain High Despite Q2 Dip.

ATTOM Data Solutions released its Q2 2021 U.S. Home Sales Report, this week in real estate, which shows the typical single-family home and condo sale during Q2 generated a profit of $94,500 compared to a profit of $60,572 in Q2 of 2020. The 30-year fixed mortgage rate also fell back to the lowest level since February. Below are a few newsworthy events from the final week of July that influence our business:

U.S. Home Sale Profits Remain High But Take Unusual Fall in Second Quarter.

ATTOM released its second-quarter 2021 U.S. Home Sales Report Thursday which shows that profit margins for home sellers took an unusual dip in the second quarter but still were far above where were they were a year earlier. In a sign that the housing market remained super-heated but that investment returns may be declining, the report reveals that the typical single-family home and condo sale across the United States during the second quarter of 2021 generated a profit of $94,500. That was up from $90,000 in the first quarter of 2021 and from $60,572 in the second quarter of 2020. However, the profit margin on the median-priced house or condominium – the return on investment that sellers made on their original purchase price declined from 48.4 percent in the first quarter of this year to 44.9 percent in the second quarter. While the latest margin remained 13 points above the 32 percent level recorded a year earlier, the drop-off marked a rare decline during a time of year that usually produces some of the best returns for sellers. The last time typical returns on investment dropped nationally during any second-quarter period was in 2008. The mixed picture of high, but reduced, profit margins came as the national median home price hit yet another record in the second quarter of 2021, reaching $305,000. That was up 11 percent from $275,200 in the first quarter of 2021 and 22 percent from $250,000 in the second quarter of 2020. The annual price surge marked the largest since at least 2006 and was two to four times greater than increases seen just a year ago. Still, profits dropped in the second quarter of this year because price gains – high as they were – were smaller than increases that recent sellers had been paying when they originally bought their homes. The gap between the latest price gains and earlier increases caused a dip in profit margins. “Prices and profits from the second quarter painted yet another picture of a housing market in high gear – except for one thing. Profit margins dropped in the second quarter, which is very unusual for any Springtime period because that’s when the housing market is usually hottest or close to it,” said Todd Teta, chief product officer at ATTOM. “While it may just be a momentary thing in today’s volatile market, it’s definitely something to keep an eye on in case it’s a sign that the market is finally cooling or giving in to some of the economic forces connected to the virus pandemic.” Full Story…

Mortgage Rates Just Dropped To A Six-Month Low, and Refinances Shoot Higher.

The popular 30-year fixed mortgage rate fell back to the lowest level since February last week, and the 15-year fixed set a record low. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.01% from 3.11%, with points decreasing to 0.34 from 0.43 (including the origination fee) for loans with a 20% down payment. The average rate on the 15-year fixed set a new low of 2.36%. Mortgage rates continued to slide early this week, but all eyes and ears are now on the Federal Reserve’s statement coming Wednesday at 2 p.m. ET. Full Story…

Appraisal Gap Increases in “Hot” Markets.

Beginning in January 2020, nationally, 7% of purchase transactions had a contract price above the appraisal, but by May 2021, the frequency had increased to 19% of purchase transactions. As expected, the frequency of a contract price being below the appraised value decreased from 69% in January 2020 to 52% one year later. The frequency of the appraised value matching the contract sales price remained relatively flat, moving from 24% to 29%. During the same period, the CoreLogic Home Price Index (HPI) began a steady climb, moving from 4% annual growth in January 2020 to 15% through May 2021. As we look at the HPI and the appraisal data together, we can clearly see that home price growth and the frequency of the contract price being above the appraisal are on the same trajectory. An appraiser’s objective is to estimate the market value of a home on a given day. Appraisers rely on recent arm’s length sales data – evidence of buyer and seller decisions – upon which to base their opinion of value. But transactional sales data can lag; for example, a sales price may be negotiated two months before closing; meanwhile, the prices offered by buyers have continued to increase. This reality impacts the ability of appraisers to easily account for or adjust for current market conditions when the market is rapidly changing. Regardless, appraisers must include market condition adjustments in their appraisal analysis when warranted by market evidence. It is important to note that not all completed sales transactions are indicative of rational buyer behavior; appraisers must analyze the data and decide. Full Story…

Originally compiled & posted by Jason Waugh on the Berkshire Hathaway HomeServices Northwest Real Estate company blog.

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Mitch Darby

I am a real estate broker, architect (both licensed in the State of Oregon), and life-long Oregonian. If you are looking to buy or sell, I can help! I have Northwest Knowledge and am proud to be associated with Berkshire Hathaway HomeServices - Real Estate's Forever Brand!

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