Record second-quarter prices lead to big profits for sellers
Maybe it’s the celebration at the end of the party, but home sellers enjoyed record-setting profits during the second quarter, thanks to record-high prices.
As the Federal Reserve increased interest rates in May and June, and messaged that more would follow, many wanna-be buyers played beat the clock to become homeowners.
The fast-paced activity caused home prices to peak and reach a record during the second quarter nationwide and in California (see table below).
Many of the homeowners who sold enjoyed record-setting profits – from a head-turning $700,000 in San Jose to $338,800 in San Diego. Even home sellers in California’s lower-cost markets – such as Bakersfield and Fresno – pocketed more than $130,000, according to ATTOM Data Solutions.
In fact, Bakersfield had the biggest percentage profit-margin increase at 45% during the second quarter, compared to the same three-month period in 2021.
Home sellers netted hefty gains in the second quarter
| Region | Profit from sale | % gain in profit vs. a year ago |
|---|---|---|
| San Jose-Sunnyvale | $700,000 | 24% |
| San Francisco-Oakland | $556,000 | 10% |
| San Diego | $337,500 | 30% |
| Los Angeles | $308,000 | 18% |
| Santa Barbara | $307,750 | 12% |
| Santa Rosa | $280,000 | 15% |
| Riverside-San Bernardino | $234,000 | 38% |
| Sacramento-Roseville | $225,000 | 13% |
| Fresno | $140,000 | 31% |
| Bakersfield | $130,500 | 45% |
SLOWER PRICE GROWTH AHEAD
Nationwide, the average home sold during the second quarter generated home sellers a profit of $124,000, a 38% increase compared to a year ago, according to ATTOM.
Bakersfield and San Diego were the only two cities in California that matched or passed the national percentage increase, but every region of the state exceeded the $124,000 mark.
“Home sellers in the second quarter continued to benefit from the rapid growth in home-price appreciation the country has experienced over the past few years,” says Rick Sharga, executive vice president of market intelligence for ATTOM. “While price growth may slow as higher mortgage rates dampen demand from prospective homebuyers, home sellers should continue to profit from the record $27 trillion in homebuyer equity in today’s market.”
Indeed, the double-digit gains that dominated much of the past two years have slowed significantly in recent weeks, according to the California Association of Realtors. CAR economists say annual percentage price gains should be slightly less than 10% in 2022.
So, the party is over. Well, not so fast. A 10% annual increase may not cause cheers compared to the past two years, but it would exceed the average annual price growth of the past five decades in California, according to industry reports.
It’s all about perspective.
A DECADE OF BUILDING WEALTH
And for those who bought homes at the bottom of the housing market during the Great Recession and sold during the second quarter? They all doubled – and many tripled or even quadrupled – their investment in the matter of a decade or so.
For example, San Francisco homeowners who bought in first-quarter 2009, enjoyed a 300%-plus gain from selling their property in second-quarter 2022. Stockton-area home sellers netted a 282% profit, while San Jose-Sunnyvale sellers made, on average, a 275% profit.
That’s arguably the best example of buying on the dip and likely selling at the peak, at least for the foreseeable future.
Record prices for homes that sold in the second quarter
| Region | Median sale price | % gain vs. a year ago | % gain from the bottom of the market |
|---|---|---|---|
| San Jose-Sunnyvale | $1.5 million | 15% | 275% |
| San Francisco-Oakland | $1.23 million | 9% | 308% |
| Los Angeles-Long Beach | $909,000 | 12% | 184% |
| San Diego | $845,000 | 17% | 204% |
| Ventura-Thousand Oaks | $829,000 | 11% | 151% |
| Santa Barbara | $800,000 | 7% | 221% |
| Santa Rosa | $780,000 | 10% | 174% |
| Sacramento-Roseville | $585,000 | 11% | 244% |
| Riverside-San Bernardino | $560,000 | 18% | 261% |
| Stockton-Lodi | $550,000 | 12% | 282% |
| Fresno | $385,000 | 14% | 196% |
| Bakersfield | $585,000 | 11% | 244% |
