Home seller profits reached record highs in 2020. According to new data, the average seller netted a whopping $68,843 last year — up $15,000 from 2019 and $20,000 from the year before.
The average return on investment jumped, too, clocking in at almost 35% per property. Again, it’s a notable jump from prior years (29% in 2019 and 27% in 2018).
According to Todd Teta, chief product officer at ATTOM Data Solutions, steeply increasing home prices — brought on by unprecedented demand — were the main driver behind the profit jumps. He explained:
Last year marked a unique year in the history of home prices and profits in the United States. A once-in-a-century health crisis tore through much of the nation’s economy but seemed to have the opposite effect on the housing market. Demand remained strong as people who could afford the space and relative safety of single-family homes did just that, aided by super-low mortgage rates and a strong stock market. But they went after a narrowing supply of housing stock, so prices soared, and so did seller profits.
Where profits are highest
The trend toward higher profits was hardly localized. In fact, seller profits rose in over 90% of all housing markets, according to ATTOM’s data.
Seller ROIs were highest in:
- San Jose, California (87.3% ROI)
- Seattle (72.1%)
- Salem, Oregon (69.6%)
- Spokane, Washington (69.2%)
- San Francisco (68.2%)
The biggest annual increases in ROI were seen in:
- Mobile and Birmingham, Alabama
- Augusta, Georgia
- Hartford, Connecticut
- Rochester, New York
- St. Louis
Should you consider selling this year?
If you’re a real estate investor, this latest data probably has your wheels turning. Should you take advantage and reap those rewards while you can? Or is there a chance prices will rise more this year, driving those profits up even further?
There are a few things you should consider before making your decision. First off, yes: Experts do expect prices to rise this year, albeit at a slower clip. Realtor.com, for example, forecasts a 5.7% jump. Freddie Mac’s (OTCMKTS: FMCC) prediction is 5.4%. Though that could mean more profits await you a year or two down the line, that’s far from guaranteed. As we saw in 2020, life is unpredictable — and home values? They’re no exception.
You’ll also want to think about your financial needs. If you’re one of the many landlords having difficulty collecting rent right now — or even just experiencing financial difficulty due to COVID — selling your property could give you a much-needed leg up. It could also boost your emergency fund in case the pandemic stretches out much longer.
Finally, consider your long-term goals. If you’re going to offload the property but end up wanting back in shortly down the road, it might not be the best move. Remember, if you’re selling at a high cost, you’ll be buying at those increased prices, too. The only difference is you’ll lose all that pent-up equity in the process.
The bottom line
Seller profits are way up, but that doesn’t mean you should jump the gun and list your properties right this very moment. Take time to consider both your short-term needs and long-term goals before making a decision, and think about talking to a local real estate agent, too. They can help you gauge your property’s worth, as well as how it will perform in the local market. That can factor into your decision as well.