The housing market has exploded in the past year. According to the carefully followed S&P CoreLogic Case-Shiller indexes, national home prices rose 19.8% in August, compared to the same month of last year. In one of the largest cities the research covers, Phoenix, the figure rose by 33.3%.
Why have these increases happened? Very low mortgage rates making homes more affordable is one reason. Another is that people have decided to relocate from the country’s largest cities, mostly on the Atlantic and Pacific coasts, to less expensive cities inland. One trigger for this is that millions of people now work from home and can do their jobs from anywhere. Ironically, this rush to some cities has caused prices in those cities to spike by rates well into the double-digit percentages.
Some people and companies have been able to take advantage of the swift rise. They have positioned themselves to buy homes and flip them quickly. Moreover, people who have owned their homes for years have decided to take advantage of the sharp increases to cash in.
Real estate research firm ATTOM recently analyzed the home sales trend. After describing home sales patterns since the Great Recession, the report pointed out:
In yet another sign of how strong the U.S. housing market remains, the report reveals that the typical home sale across the country during the third quarter of 2021 generated a profit of $100,178 as the national median home price hit a record of $310,500.
The study covered 204 markets. In 90% of these, the difference between the median purchase price and the resale price increased. The study pointed out two other trends. Institutional investors accounted for 7.3% of purchases of homes in the quarter. This activity is almost always to set up homes for rent or sell them quickly at a profit. Another trend is that 34% of purchases were made by cash.
The city with the largest percentage increase in profit margins was Boise, where the figure in the third quarter of 2021 was 130.3%. This is up from 61.4% last year. In areas with populations over a million, the winner was Detroit, up 68%, compared to an increase of 43% last year.
Click here to see the most expensive cities in which to buy a home.
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