Report: Sellers realized an average gain of $44,000 in Q1 2017
Homeowners who sold their property during the first three months of the year typically realized a considerable profit from the transaction, according to the real estate data company RealtyTrac.
In its U.S. Home Sales Report for the first quarter of 2017, RealtyTrac determined that the average sale prices was $44,000 higher than the price at which the seller purchased the property. This margin represented an average return on the purchase price of 24 percent. Both the dollar gain and return on purchase percentage were at their highest levels since the third quarter of 2007.
The report also found that sellers had been living in the property for much longer than sellers prior to the Great Recession. The typical homeowner who sold their property in the first quarter of 2017 had lived there for 7.97 years – down slightly from a record high of eight years in the fourth quarter of 2016, but up from 7.68 years in the first quarter of 2016. Between the start of 2000 and the third quarter of 2007, the average seller lived in a property for only 4.26 years before putting it on the market.
"The first quarter of 2017 was the most profitable time to be a home seller in nearly a decade, and yet homeowners are continuing to stay put in their homes longer before selling," said Daren Blomquist, senior vice president of the RealtyTrac parent group ATTOM Data Solutions. "This counterintuitive combination is in part the result of the low inventory of move-up homes available for current homeowners, while also perpetuating the scarcity of starter homes available for first-time homebuyers."
The report looked at 97 metropolitan statistical areas which had at least 1,000 home sales in the first quarter of the year and previous sales information available. In all but six of these markets, the average seller saw a profit from putting their home on the market.
The median sales price during the quarter was $225,000, a year-over-year gain of 13 percent and a 2 percent increase from the previous quarter. This remained slightly below the pre-recession peak of $227,000 in the third quarter of 2005.
In several markets in California, which has seen robust economic growth and increased competition due to a limited amount of properties for sale, the typical seller saw a six-figure price gain. San Jose had an average return on investment of 71 percent, with a typical price gain of $356,500. In San Francisco, the average seller had a $276,750 price gain – a return on investment of 65 percent.
Fifty-four percent of markets saw home price peaks at their highest level since the Great Recession. In six markets included in the report, home price peaks were at all-time highs.
Sellers in Baton Rouge, La., were most likely to see a negative return on investment. Sales in this market had an average price drop of 10 percent from the purchase price. Other markets with an average loss in value included Huntsville, Ala. (5 percent), Milwaukee, Wis. (3 percent), and Columbia, S.C. (3 percent).
Thirty percent of single-family home and condominium sales in the first quarter were purchased without financing, down from 32.1 percent in the first quarter of 2016 but up slightly from 29.1 percent in the fourth quarter of that year. All-cash sales reached their highest rate in the first quarter of 2011, when 44.7 percent of single-family home and condominium sales went to buyers who didn't use financing.
The highest share of all-cash sales in the first quarter of the year, among 150 metro areas with a population of at least 200,000 and at least 100 all-cash sales, was Salisbury, Md. A total of 61.2 percent of sales in this market did not require financing. All-cash sales also made up a large portion of transactions in Raleigh, N.C. (60.6 percent), Naples, Fla. (56.6 percent), and Binghamton, N.Y. (54.3 percent).
For the 23rd consecutive quarter, the share of distressed sales such as foreclosures and short sales experienced a year-over-year decrease. A total of 16.9 percent of transactions in the first quarter of 2017 were distressed sales, up from 15.5 percent in the previous quarter but down from 20.3 percent in the previous year.
Distressed sales were most common in Atlantic City, N.J., where 42.7 percent of transactions were distressed. Other major markets where distressed sales made up a large share of transactions included Rockford, Ill. (34.3 percent), Trenton, N.J.; Indianapolis; and Philadelphia (each 30.7 percent).
Institutional investors, or entities purchasing 10 or more properties in a calendar year, accounted for only 1.7 percent of sales. This share was at its lowest point since the first quarter of 2000, when the earliest data was available.
A total of 14.5 percent of buyers during the quarter were purchasing a home through the Federal Housing Administration, which typically allows first-time buyers or those making a small down payment to purchase a home. This share was down from 15.1 percent in the previous quarter and 15 percent in the previous year to reach a two-year low.
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