Big price gains in recent years generated huge returns for home sellers during the third quarter, including a nation-best $785,000 in San Jose.
California homeowners embracing a buy-and-hold strategy – including some who bought during the housing market crash during the Great Recession – have enjoyed head-turning paydays and profits, according to ATTOM Data. Four cities in California had the largest paydays in the nation, with San Francisco, San Diego and Los Angeles in the $377,000 to $381,000 range.
And all eight markets, from Sacramento to San Diego, had 60%-plus returns for sellers, including 110% in the Silicon Valley. Even the Central Valley, where homes are more affordable and have smaller price increases, had profit margins of 71% in Bakersfield and 65% in Fresno.
The payouts for selling homes declined in three of the eight markets compared to third-quarter 2023, and plummeted 25% in San Francisco, where prices remain volatile. But even with the drop, San Francisco-area owners had a 61% profit when selling. San Jose and Los Angeles had the largest increases in payouts from a year ago (see table).
Percentage of
all-cash deals
Bakersfield: 35%
Fresno: 32.1%
Los Angeles: 37.0%
Riverside: 32.7%
Sacramento: 33.0%
San Diego: 31.4%
San Francisco: 31.8%
San Jose: 26.2%
Source: Redfin
‘GENERALLY GOOD NEWS FOR HOMEOWNERS’
The percentage gains and profit margins are based on when buyers purchased and sold their homes, and the figures do not include other costs, such as commissions to listing agents and paying off the mortgage, if one remains.
Also, like most things in life, timing is everything. A buyer who bought at the bottom of the market in 2011, when the median home-price tumbled 50% from the peak, the profits are staggering. For those who bought homes in 2020, the gains are much smaller. The average California homeowner stays in their home about 10.5 years, one of the longest tenures in the U.S.
Nationwide, home sellers had a 56% gain on their home during the third quarter, a modest 2% dip from a year ago. The average seller had a $128,700 payout in the July-September period, a 2.7% increase from a year ago and near the record of $135,000 in 2022.
“The latest price and profit numbers provided another round of generally good news for homeowners, tempered by a bit of a downside,” says Rob Barber, CEO of ATTOM. “Home values remained at or near record levels around large swaths of the country, keeping seller profits far above historical levels.”
‘PEAK BUYING SEASON ENDS’
California’s housing market has cooled with the higher mortgage rates and near-record prices. Many buyers are avoiding the higher rates and paying with cash, with all-cash deals accounting for 34% of sales during the third quarter in California (see table)
More homes have also been available during the past few quarters, easing the critical supply shortage from spring 2020 through 2023.
“The housing market settled down after a big second quarter, which extended a slow fallback in profit margins that started last year,” Barber says. “If history is a good guide, the fourth quarter is likely to bring more of the same as the peak buying season ends.”
Home seller price gains, profit margins in Q3 2024
| Metro | Q1 profit from sale | % profit change vs. Q2 ’23 | % profit on investment |
|---|---|---|---|
| Bakersfield | $145,000 | +7.0% | +70.7% |
| Fresno | $157,000 | -2.0% | +65.4% |
| Los Angeles | $376,000 | +9.0% | +65.7% |
| Riverside | $232,637 | -4.0% | +69.0% |
| Sacramento | $215,000 | -4.0% | +60.6% |
| San Diego | $377,000 | +3.0% | +74.2% |
| San Francisco | $380,600 | -25.0% | +61.4% |
| San Jose | $785,000 | +11.0% | +109.8% |
Source: ATTOM Data
Rent-control proposition swings and misses for third time in six years. SHUTTERSTOCK
Rent-control measure loses, again
Despite more than half of renters spending at least 30% of their income on housing in California, a controversial bill that would have allowed local government to control rent failed to gain support.
Almost two of every three voters voted against Proposition 33, embracing the argument that controlling rent at a local level would greatly affect development of rental housing down the road and likely increase rent in the long-term. If passed, the proposition would have repealed the Costa-Hawkins Rental Housing Act, which blocks local governments from establishing rent control on single family homes and apartment communities built since 1995.
Rent-control measures have failed three times since 2018.
$150 MILLION IN CAMPAIGN SPENDING
Opponents of the proposition – from apartment community developer-manager-owners, landlords and many Realtors – said the proposition, if passed, would have cut into profits and reduce multifamily development. California already has a critical shortage of apartments and single-family homes with an estimated 2.5 million needed in the next few years.
Others claim the proposition, again if passed, could encourage some cities, such as Huntington Beach, to approve extremely low rents and eliminate future construction of multifamily housing.
The California Democratic Party and the AIDS Healthcare Foundation were major supporters of Prop. 33. Tenant groups and unions also backed the measure.
However, Gov. Gavin Newsom and State Sen. Toni Atkins and Assemblymember Buffy – leading Democrats and housing proponents – were against Prop. 33.
Proposition 33 generated more than $150 million in campaign spending, with ads appearing on newspaper sites, TV commercials and online during the past few months.
California already has rent control for many apartment communities, with a maximum annual increase of 5% plus the inflation rate, but cannot exceed 10% overall, for existing renters.
Long-term tenants often benefit with smaller rent increases that can add up over time. SHUTTERSTOCK
$1,000 apartments in California, really?
Californians deal with some of the priciest rents in the nation, especially in the Bay Area and Southern California.
But ready for a jaw-dropping stat? About one of every eight renters statewide pays less than $1,000 per month.
More than one of every five (22%) renters in the Riverside area pays $1,000 or less, the largest percentage in the state. San Diego has the smallest percentage of pint-sized rents at 7%, followed by San Jose at 8%, according to a Redfin report.
Now, the percentage of $1,000-or-less renters has changed dramatically, as rents have significantly increased since the pandemic in early 2020. For example, 18% of renters pay less than $1,000 per month in Sacramento, a dramatic decline from the 20% four years ago – and the 48% in 2012.
LONG-TERM TENANTS HAVE MUCH SMALLER RENT INCREASES
Nationwide, about 32% of renters pay $1,000 or less per month, including Oklahoma City and New Orleans at 63%.
About two of every five renters who pay less than $1,000 per month have been living in their home for more than five years. Cheap rent causes many renters to stay put, since finding comparable-priced housing is tough.
“Rising rents have made it increasingly difficult for people to find housing in America,” says Redfin senior economist Sheharyar Bokhari. “Low-income workers, college students, immigrants and people on the fringes of homelessness have had to come up with new ways to be resourceful, with some taking on multiple roommates and others receiving financial support from family or friends.”
Percentage of renters who pay less than $1,000
| City | % of renters ’24 | % of renters ’19 | % of renters ’12 |
|---|---|---|---|
| Los Angeles | 13.0% | 12.3% | 19.4% |
| Riverside | 21.7% | 23.3% | 36.2% |
| Sacramento | 17.9% | 19.6% | 47.6% |
| San Diego | 7.1% | 9.9% | 12.9% |
| San Francisco | 15.0% | 16.6% | 20.3% |
| San Jose | 7.8% | 8.2% | 12.3% |
Source: Redfin
