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A year after the housing market took a turn for the worse, a new report shows that homesellers’ profits are way down as home prices sputter.
The report out Thursday, from data and analytics firm ATTOM, shows that in the first quarter of 2023, the profit margin on a median-priced U.S. home was 44.2 percent. The good news for sellers is that such a margin is almost double what it was four years ago. But the report also shows that profits are down from the final quarter of 2022, when margins stood at 48.7 percent, and from the all-time high of 56.1 percent in the second quarter of last year.
In other words, profits from home sales are way down from their pandemic-era highs.
The report goes on to describe the housing market has having “been stalled since the middle of last year,” and notes that the median price of a U.S. home has fallen 7 percent since hitting a high point in the second quarter of last year. The report points to rising mortgage rates and a faltering stock market as culprits.
Rob Barber
ATTOM CEO Rob Barber further explained that “homeowners are starting to take a significant hit in the form of lost profits from the recent market slowdown,” according to the report.
“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,” Barber continued. “That’s a striking reversal of what we saw for a decade.”
Broken down by region, 68 percent of the 137 U.S. metro areas ATTOM analyzed saw the profit margins on home sales stay flat or go down from the final quarter of last year to the first quarter of this year. Compared to a high point in the second quarter of last year, profits were down in the first quarter of 2023 in 90 percent of metro areas.
The metros with the biggest declines include Akron, Ohio; Stockton, California; Louisville, Kentucky; Prescott, Arizona; and Buffalo, New York.
The report also touches on prices, noting that they fell quarter over quarter at the beginning of 2023 in 75 percent of metro areas.
However, homeowners and sellers will at least be pleased to know that the national first-quarter median home price of $321,135 was still up 1 percent compared to the final three months of 2022, according to the report.
Credit: ATTOM
Another finding reveals that homeowners are spending less time in their houses, the report notes. Overall, owners who sold during the first quarter of this year lived in their properties for just 5.59 years. That’s down from 5.81 years in the fourth quarter of 2022 and represents a 12-year low point.
The fact that foreclosures remain low, cash sales have hit a 10-year high point, and institutional investment as a percent of all home purchases declined are other trends highlighted in the report.
Looking forward, the report describes the market’s future prospects as “murky.” It notes that mortgage rates and inflation have experienced modest improvements, but also that there are still fears of a recession and future rate hikes. On the other hand, Barber also floated the possibility that the coming months might see an improved market, though only time will tell if that actually happens.
“It is possible that the upcoming peak buying season of 2023 could lead to increased profits, owing to favorable mortgage rates and other factors,” Barber said. “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.”
