Tri-Cities Q2 home sales profits high, but take unusual dip

Tri-Cities homeowners who sold during the second quarter saw profit margins dip at a time when the market is typically at its peak. While one quarter doesn’t make a trend, it’s something to watch. It could be a sign the market is cooling or giving in to economic forces connected to the pandemic. There’s an extra warning flag since the Kingsport-Bristol market is the most vulnerable in the state if the pandemic begins to affect the housing economy.

But before anyone starts singing “Turn Out The Lights The Party’s Over” profits were still in double digits and higher than they were at the beginning of the year.

This wasn’t a local phenomenon, according to ATTOM Data Solutions Home Sales Report.

ATTOM’s report says second-quarter profit performance was a sign that the housing market remained super-heated but that investment returns may be declining. It pointed out the typical single-family home and condo sale nationwide generated a profit of $94,500. That was up from $90,000 in Q1 and from $60,572 in the second quarter. However, the profit margin on the median-priced house or condominium – the return on investment that sellers made on their original purchase price – declined from 48.4% in Q1 of this year to 44.9% in Q2.

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ATTOM’s home seller price gains are the difference between the median sales price of homes in a given market in a given quarter and the median sales price of the previous sale of the sale homes.

The mixed picture of high but reduced profit margins came as the national median home price hit yet another record in the second quarter of 2021, reaching $305,000.

Local median sales prices were also at their record highs at the end of the second quarter and during the first half of the year.

Johnson City metro

Johnson City metro area sellers saw a Q2 profit of $45,300, down from $50,500 during Q1.  The percentage gain from this time last year was up 6%.

June’s median sales price was $241,000, up 26.8% from last year. At mid-year, it was $219,900, up 22% from last year.

Kingsport-Bristol metro

Kingsport-Bristol sellers did a little better. They had a $47,000 second-quarter gain, down from $48,200 during the first quarter. The year-over-year gain was up 10.3%.

June’s median sales price was $202,500, up 19.2% from June last year. The year-to-date median price was $179,250, up 14.6% for the first six months of last year.

Dollar gains peaked during the fourth quarter of both Tri-Cities metro areas.

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The recent price and profit trends reflect a housing market that has continued a decadelong upward spiral, even as the pandemic has damaged significant sectors of the U.S. and local economy. During that time, a glut of buyers chased a tight supply of homes for sales, raising demand and spiking prices.

Ten years ago, the dollar gain in the Johnson City metro market was $13,622. It was $15,520 in Kingsport-Bristol.  The decade profit percentage in the Johnson City market was 232.6% and 169.7% in Kingsport-Bristol.

“Prices and profits from the second quarter painted yet another picture of a housing market in high gear – except for one thing. Profit margins dropped in the second quarter, which is very unusual for any Springtime period because that’s when the housing market is usually hottest or close to it,” said Todd Teta, chief product officer at ATTOM. ”

Kingsport-Bristol most vulnerable to pandemic

In an earlier report on housing markets that are the most vulnerable to the impact of the Coronavirus pandemic, Kingsport-Bristol had the top spot in Tennessee.

That’s not as ominous as it sounds if you look at Tennessee metro areas in relation to the 564 nationwide. None of the state metro area housing markets made the top 50 most-at-risk list.  All ranked near to the bottom of the risk list.

Kingsport-Bristol had an at-risk ranking of 405 and the Johnson City metro area had a 463 ranking.

Tennessee’s least at-risk housing market was Nashville-Davidson-Murfreesboro-Franklin at 560.

Markets were considered more or less at risk based on the percentage of homes facing possible foreclosure, the portion with mortgage balances that exceeded the estimated property value and the percentage of average local wages required to pay for major homeownership expenses on median-priced houses or condominiums. The conclusions are drawn from an analysis of the most recent home affordability, equity and foreclosure reports prepared by ATTOM. Rankings were based on a combination of those three categories in 564 counties around the United States with sufficient data to analyze in the first and second quarters of 2021. Counties were ranked in each category, from lowest to highest, with the overall conclusion based on a combination of the three ranks.

“The Coronavirus pandemic is easing, and the U.S. economy is gradually coming back to life, which suggests that the nation’s housing market will indeed escape any major damage from the crisis. No major signs are showing anything different at this point. Nevertheless, the pandemic is still out there and remains a potent threat to home sales and values, as well as to the broader economy,” said Teta. “Amid a generally upbeat outlook, we continue to see areas that appear more at risk for a fall, especially in specific areas of the East Coast and Midwest. As we have throughout the pandemic, we will keep a close eye on those areas in case the situation worsens and the pandemic surges again.”

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