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Americans who sold their homes in the first quarter of 2022 are still reaping record returns on their investment, but the margin of profit is slipping in almost half of the major metropolitan areas surveyed by ATTOM, a real estate data firm.
In Las Vegas, the profit margin dropped 10% from the fourth quarter of 2021, with first-quarter sellers gaining an average of $89,999 compared with $100,000 in the last quarter of 2021.
In Reno, the profit margin was up 4.4% for the quarter, from $206,261 to $215,299.
Profit margins declined quarterly in more than 40% of metro areas around the U.S., led by Santa Barbara, CA (down from 72.9% in the fourth quarter of 2021 to 45.8% in the first quarter of 2022); Boise, ID (down from 110.4% to 88.8%); Brownsville, TX (down from 54.3% to 38.1%); St. Louis, MO (down from 37.6% to 23.9%) and Des Moines, IA (down from 48.1% to 35.2%).
Return on investment for first-quarter sellers nationwide dipped to 47.2% from a record high 51.6% the previous year. It’s the first quarterly decline since 2019, the largest in a decade, and “a sign that the nationwide housing-market boom may be slowing,” according to a new report from ATTOM.
Gross profits on a “typical single family home sale across the country” slipped from $107,187 in the fourth quarter of last year to $103,000 in the first quarter of 2022, still well above the $75,001 realized a year ago.
Home sales, buoyed by historically low interest rates and buyers searching for larger homes and yards during the pandemic, have surged along with prices, which are grossly disconnected from market basics such as income growth, according to experts.
Quarterly prices increased 6.4% in Las Vegas. The median price of a single family home was $460,000 in March, according to Las Vegas Realtors.
Home prices nationwide increased 1.7% in the first quarter, from a median of $315,000 in the fourth quarter of 2021 to $320,500. Prices were up 16.5% from a year ago.
Prices increased quarter-to-quarter in half of the nation, according to the report.
The biggest increases in median home prices were in Honolulu, HI (up 7.9%); Port St. Lucie, FL (up 7.7%); Lakeland, FL (up 7.6%); Austin, TX (up 7.6%) and Cape Coral-Fort Myers, FL (up 7.5%).
First quarter prices beat or tied record highs in 47% of the metro areas surveyed, including New York, NY; Los Angeles, CA; Dallas, TX; Houston, TX, and Miami, FL.
“Home prices simply can’t continue to go up as rapidly as they have for the past few years,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “The combination of higher prices, rising mortgage rates, and the highest rates of inflation in 40 years may be pricing some prospective buyers out of the market, which means we may begin to see lower sales numbers. Ultimately, as affordability worsens, price appreciation should slow down, and we may even see modest price corrections in some markets.”
In Nevada, institutional investors are buying 8.4% of homes sold, twice the national average. That’s down from 14.3% in the fourth quarter of 2021.
Institutional investment nationwide is down by more than half this year, accounting for 4.1% of single-family home purchases compared with 9% in the fourth quarter of 2021.
“For those people who still believe the theory that institutional investors are buying up all the available inventory, the numbers in our Q1 2022 report offer a pretty strong rebuttal,” Sharga added. “It’s also interesting that cash sales – often attributed to institutional investors – continued to increase even as investor activity diminished.”
Arizona leads the nation in sales to institutional investors at 10.7%, followed by Georgia (9.3%), North Carolina (8.7%), Nevada (8.4%) and Texas (6.1%).
Homeowners are holding on to their properties for a shorter duration than any time in the past decade. Those who sold in the first quarter owned their homes an average of 5.72 years, down by more than a year from the first quarter of 2021 when the average was 6.82 years.
In Las Vegas, homeowners are holding on to their properties for 5.46 years, down 29% from the fourth quarter of 2021 (7.65 years) and down 45% from a year ago (9.97 years).
“Existing home sales typically account for 80-90 percent of all home sales, and increased homeownership tenure over the past decade has had an impact on the inventory of homes available for sale,” Sharga noted. “If we continue to see a reversal of that trend, it could bring desperately needed supply back to the market, which would help stabilize prices.”
The report says homeowners in Honolulu held on to their properties the longest – 8.5 years, followed by Bellingham, WA (8.31 years); Manchester, NH (7.79 years); Hilo, HI (7.65 years) and New Haven, CT (7.6 years).
Cash purchases accounted for 34.2% of single-family home sales nationwide in the first quarter of 2022, the highest level since the first quarter of 2015.
In March, just under 32% of Southern Nevada homes sold were purchased with cash, according to the Las Vegas Realtors.
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