Profit margins on median-priced single-family home and condo sales decreased from 48.7% in Q4 2022 to 44.2% in Q1 2023 as home prices stayed flat or kept declining around most of the nation, according to a new report from ATTOM.
ATTOM’s Q1 2023 Home Sales Report found that the drop-off in typical profit margins marked the third straight quarterly decrease nationwide and resulted in the lowest investment return since mid-2021. It came as the national median home price rose just 1% quarterly, to $321,135, and values commonly went down in almost three-quarters of major housing markets around the country.
However, the report found that the typical investment return nationwide did remain high in the first quarter—almost double where it stood four years ago. But, the margin was off by 12 points from the peak of 56.1% hit in the second quarter of last year.
Key highlights:
- Typical profit margins stayed the same or went down from Q4 2022 to Q12023 in 93 (68%) of the 137 metropolitan statistical areas around the U.S. with sufficient data to analyze. They were flat or down in 123 (90%) of those metros compared to the second quarter of last year, when returns hit a high point nationwide.
- The biggest quarterly decreases in typical profit margins came in the metro areas of Akron, Ohio (from 66.7% to 47.8%); Stockton, California (from 76.7% to 59.4%); Louisville, Kentucky (from 48.6% to 32%); Prescott, Arizona (from 73.3% to 58.1%) and Buffalo, New York (from 66.2% to 51.5%).
- Typical profit margins increased quarterly in just 44 of the 137 metro areas analyzed (32%). The biggest quarterly increases were in Trenton, New Jersey (from 43.6% to 78.6%); Scranton, Pennsylvania (from 63.3% to 87.5%); Lake Havasu City, Arizona (from 63.6% to 82.8%); Atlantic City, New Jersey (from 33.2% to 48.5%) and Reading, Pennsylvania (from 53.9% to 68.8%).
- Profits on median-priced home sales, measured in raw dollars, stayed the same or decreased in 100 (73%) of the metro areas analyzed for this report.
- The biggest quarterly raw-profit decreases in areas were in St. Louis, Missouri (-30%); Louisville, Kentucky (-29%); Birmingham, Alabama (-28%); New Orleans, Louisiana (-24%) and Buffalo, New York (-22%).
- The largest raw profits on median-priced sales were in San Jose, California ($475,000); San Francisco, California ($316,000); Naples, Florida ($255,750); San Diego, California ($242,750) and Seattle, Washington ($236,000).
- Median home prices decreased or remained the same compared to the prior quarter in 104 (75%) of the 139 metro areas, although they were still up annually in 102 of those metros (73%). Nationally, the median first-quarter price of $321,135 was up 1% from $318,000 last quarter and up 1.6% from $316,000 last year.
- The biggest decreases in median home prices were in Toledo, Ohio (-13.7%); Trenton, New Jersey (-13.3%); Pittsburgh, Pennsylvania (-11.1%); Detroit, Michigan (-9.5%) and San Francisco, California (-8.8%).
- The largest increases in median prices came in Ogden, Utah (+7.2%); Naples, Florida (+6%); Savannah, Georgia (+5.8%); Fort Myers, Florida (+5%) and Crestview-Fort Walton Beach, Florida (+4.9%).
- Homeowners who sold had owned their homes an average of 5.59 years. That was down from 5.81 years last quarter and 5.68 years last year, to the lowest point since mid-2011.
- Average tenure decreased from last year in 56% of metro areas. The largest declines were in Atlantic City, New Jersey (-27%); Dayton, Ohio (-19%); Tallahassee, Florida (-16%); Chattanooga, Tennessee (-15%) and St. Louis, Missouri (-14%).
- 14 of the 15 longest average tenures among sellers were in the Northeast or West regions. They were led by Honolulu, Hawaii (8.21 years); Manchester, New Hampshire (8.17 years); Kahului-Wailuku, Hawaii (7.93 years); Bellingham, Washington (7.87 years) and New Haven, Connecticut (7.29 years).
Major takeaway:
“Homeowners are starting to take a significant hit in the form of lost profits from the recent market slowdown. Nine months of varying price declines around the country have carved away almost a quarter of the profit margin sellers were enjoying in early 2022. That’s a striking reversal of what we saw for a decade,” said Rob Barber, chief executive officer for ATTOM. “It is possible that the upcoming peak buying season of 2023 could lead to increased profits, owing to favorable mortgage rates and other factors. Over the next few months, we can expect to gain more clarity regarding whether the current market stagnation is a short-term aberration or a more significant trend.”
For the full report —with additional data on lender-owned foreclosures, cash sales, institutional investment and FHA-financed purchases—click here.
