Buy and sell a house in a year nets 32% return in some cities
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California home-sellers netted nifty profits during the third quarter, as the booming demand coupled with double-digit price gains generated record returns for many of the regions statewide.
And for consumers who bought homes at the bottom of the market during the Great Recession and sold in the July-through-September period, the profits were head-spinning impressive (see chart below), according to ATTOM Data Solutions.
Nationwide, the average home-seller enjoyed a record profit of $100,178 during the just-completed quarter, compared to $69,000 in the second quarter.
Hefty gains from San Diego to San Jose
Most California home-sellers celebrated much-larger profits, from about $111,000 in Fresno to $515,000 in San Jose. Only Bakersfield, which has battled a dismal economy for much of the past decade, had profits of less than $100,000.
“The third quarter marked another period in a banner year for a housing market boom that’s steaming ahead through its 10th year,” says Todd Teta, chief product officer for ATTOM in Irvine. “There have been a couple of small hints of a possible slowdown in recent months, as we head into the normally quiet fall and winter seasons. The pandemic also remains a constant presence that could tamp things down. But, for now, the market engine seems to have nothing but high-octane gas in the tank.”
California’s fast-selling housing market seems more like a Tesla Model S Plaid.
The average seller nationwide had a 48% profit, regardless of when they bought their home. Some home-sellers in California — like those in Riverside-San Bernardino and Sacramento-Roseville — had 32% returns in just the past year.
Now, California has enjoyed some of the biggest gains in recent years, but home-sellers in other states had larger profits, according to ATTOM. The gains are based on the median purchase price compared to the sale price, regardless of when homeowners bought and sold.
Home-sellers in Boise, Idaho — a popular destination for disgruntled Californians — netted a 130% profit, the largest in the nation. Bellingham, Wash. (106%), had the second-largest increase followed by Claremont-Lebanon, N.H. (94%); Spokane, Wash. (88%); and Prescott, Ariz. (85%).
California’s average home-seller profits in dollars and percentages during third-quarter 2021 compared to a year ago — and from the bottom of the market post-Great Recession
|REGION||PROFIT||PERCENTAGE GAIN-LOSS VS. YEAR AGO||PERCENTAGE GAIN FROM BOTTOM OF MARKET|
|Santa Barbara-Santa Maria||$217,750||+7.4%||157%|
Great Escape is slowing in California
As Covid cases decline and vaccinations increase, the housing market is showing signs of more pre-pandemic trends, including fewer folks looking to move out of their communities — and out of state, according to a just-released report by Redfin.
For example, the Sacramento region — arguably the most popular destination for Bay Area residents looking to buy a house, enjoy more space and escape the region during the pandemic — had fewer out-of-area searches.
Online searches for those outside the four-county Sacramento region reached 9,250 during the July-September period, a significant drop from the 11,728 a year ago. That’s about two of every five (42%) searches for Sacramento-area homes were from outside the region, down from 50% in third-quarter 2020.
Many of those out-of-area searches were from the Bay Area, as the great escape took hold with the pandemic. However, even with fewer out-of-area searches, the Sacramento housing market remains one of the strongest, with multiple offers for 71% of homes listed in September — up from 62% a year ago, according to Redfin.
And even with the decline, Sacramento was the third-most-searched housing market by outsiders during the third quarter, behind only Miami and Phoenix.
Bay Area, Los Angeles residents keep searching for more affordable markets
On the flip side, the Bay Area and Los Angeles had the most searches by residents looking to leave for another region, though the percentage was little changed compared to a year ago.
About 61,500 residents in the Bay Area looked online to move during the third quarter, about 18,000 more than a year ago. The top in-state destination was Sacramento (sound familiar?) while Seattle was the leading out-of-state market.
In Los Angeles, about 37,900 consumers (or 18.3%) searched outside the region in the third quarter, a significant increase from the 23,800 a year ago (17.3%). But the figures are a fraction of the overall population of the Los Angeles region. It’s hard to imagine the figures are an indication of a mass migration heading south to San Diego or east to Las Vegas (the most popular in-state and out-of-state searches by Angelinos).
Redfin’s migration analysis is based on 3.3 million users who searched for homes across 125 metro areas, and excluded searches unlikely to lead to an actual relocation or home purchases (you know, like when you search for the $3 million-plus homes in Lahaina, Maui, Hawaii). Also, users must have viewed at least 10 homes in a specific area, and the region must have accounted for 80% of their home searches.
Work-from-home will encourage more consumers to roam online
Nationwide, 30.2% of Redfin users looked to move outside their area in the third quarter, a slight decline from 31.1% in the second quarter — and off from the peak of 31.5% in the first quarter. Out-of-market searches have declined two consecutive quarters after increasing for four straight quarters, also known as when the Covid pandemic started.
But even as Covid concerns are easing, out-of-market searches are higher than they were before the pandemic, when they accounted for 26% of activity. And as more companies — begrudgingly or happily — allow more employees to telecommute, at least part of the time, out-of-market searches will likely remain strong, says Redfin deputy chief economist Taylor Marr.
“As employers fight to retain talent during the ongoing labor shortage, they’ll face mounting pressure to introduce permanent flexible-work policies that will give more workers the option to move where they want,” Marr says. “We’re also starting to see a resurgence in demand for vacation homes, which could help sustain the relatively high rate of house hunters searching outside their home metro.”
Expect to pay $100,000 more for that new-home smell in Sacramento
The Sacramento region, one of the best-performing housing markets in the nation, is the hardest for buyers dreaming of a new home.
Four out of five households in the four-county capital region cannot afford to buy a new home, easily the highest in the nation, tied with Miami.
The premium price for new homes is the primary reason, with the median price at $650,000 — $100,000 more than existing single-family homes, according to Knock.
However, Sacramento-Roseville was the only new-home market in California reviewed for the report by the startup.
Pay raise, please
The average household would need an annual income of at least $128,45 to qualify for a mortgage to buy a new home in the Sacramento region, according to Knock. It’s the second-highest annual income needed in the U.S., behind the $141,430 in Miami.
Certainly, record-low mortgage rates have helped, opening the door to homeownership and offsetting the record-high prices during the past year. But for buyers counting every dollar for the down payment, the premium for a new home is hard to overcome.
“Affordability remains a challenge, even with mortgage rates near historic lows,” says Fannie Mae chief economist Doug Duncan. “If the pace of income growth doesn’t keep up with inflation and interest rates rise more than expected, we’d expect to see housing activity to slow from our current projections.”
Four cities in California among 100 Best Places to Live
California boasts beautiful scenery, a booming economy, great job growth and a hard-to-beat lifestyle.
But the high cost of living, especially for housing, can be hard to overcome. And that’s the primary reason only four cities landed on the latest Livability.com’s 100 Best Places to Live list.
Livability.com compiled the closely watched list with cities ranked on several factors, including demographics, the economy, education, health, housing, infrastructure and amenities. The analysis includes a new category — remote readiness for those allowed or forced to telecommute.
Roseville, a 135,000-population city about 20 miles northeast of the state Capitol in Sacramento, finished at No. 8, the highest-ranking city in California.
The city, one of the more affordable for residents in pricey California, has a long list of selling points, including highly ranked schools, plenty of shopping and a thriving economy.
Nearby Woodland, about 20 miles northwest of Sacramento, finished at No. 55. Oxnard, about 60 miles from downtown Los Angeles, landed at no. 68, followed by Riverside at No. 82. Check out the report, which includes some information about the 100 cities on the list.
More than 2,300 small to midsize cities were reviewed for the report. Madison, Wisc.; Ann Arbor, Mich.; and Overland, Kansas, finished in the top three spots.
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.