RealEstateEconomyWatch.com

Even though home sellers are holding on to their homes longer, they are making less profit from the equity in their homes when they sell, according to new data from the National Association of Realtors.

Home owners who sold from July 2009 to June 2010 owned their homes an average of eight years received a median of 8 percent less profit from the equity in their homes when they sold compared to owners who sold the previous year.

Despite a 3.6 percent rise in sales prices during the period of the study (Fiserv/Case-Shiller Index), home sellers realized a median profit from equity of only $33,000 after eight years of ownership, which represented 24 percent of the purchase price.  Sellers who owned their homes only two or three years before they sold realized no price gain at all.

In the period July 2008 to June 2010, sellers owned their home an average of only seven years but realized a median profit of $36,000, a 27 percent price gain. Last year’s survey found that sellers fared better in the Northeast than the West; no regional breakouts were provided in this year’s study, which was released last week.

The data illustrates how low property values are eroding equity, even among owners who are holding onto their homes more than the average.  Prices have fallen an average of 28 percent since July 2006, according to the S&P/Case-Shiller Home Price Indices.  Even with the modest price increases realized during the first half of this year, when the homebuyer tax credit was in effect, prices today are about the same level as they were in 2003.  Owners who bought their homes during the run up in prices from 2004 to 2006 are having difficulty selling at a profit in most markets.  The near term outlook for these owners is not positive.  Economic forecasters are predicting prices will again decline as much as 1o percent in the next 12 months.

The annual NAR survey of 8,449 buyers and sellers covered the period July 2009 to June 2010.  The 2009 study was the first to ask sellers to report their average equity earned from price gain in recently sold homes.