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ATTOM: Profits For Home Sellers Drop In 3Q

Doug Page
Oct 20, 2022
flat sales

'If the Federal Reserve’s objective was to slow down the housing market, it succeeded spectacularly,' an ATTOM EVP said.

KEY TAKEAWAYS
  • Much of the drop in profits is due to jump in mortgage rates, now around 7%.
  • All-cash purchases dropped between the second and third quarters but are still up from last year, 35.7% of all single-family and condo sales, up from 33.9% in 2021's third quarter.
  • FHA loans accounted for 7.9% of all single-family purchases, down from 8.2% in 2021's third quarter.

Profit margins on median-priced single-family home and condo sales dropped to 54.6% during the third quarter, as home prices declined for the first time in nearly three years, according to ATTOM, a curator of U.S. real estate data.

The drop, from 57.6% in the second quarter, came as the median national home value decreased 3% in the third quarter to about $340,000, the company said.

Much of the profit loss, ATTOM reported, was due to the increase in mortgage rates, which more than doubled this year, from about 3% in January to above 7% today.

“Rapidly rising mortgage rates have not only resulted in fewer home sales but have begun to impact home prices as well,” said Rick Sharga, ATTOM’s executive vice president of market intelligence. “With rates the highest they’ve been in over 20 years, homebuyers face serious affordability challenges, with monthly payments in some markets up 50% year-over-year.

“It’s very likely," he added, "that home prices will continue to weaken in many markets in the coming months."

ATTOM said the biggest quarterly profit-margin drops came in the metropolitan areas of Claremont-Lebanon, N.H. (down to 52.4% from 72.8%); Prescott, Ariz. (down to 70.8% from 86.3%); Barnstable, Mass. (down to 59.6% from 74.5%); and Trenton, N.J. (down to 61% from 74.5%).

Metropolitan areas with a population of at least 1 million that saw the biggest drops in profit margins between this year’s second and third quarters included San Francisco (down to 65.4% from 85.1%); Seattle (down to 73.7% from 87.2%); San Jose, Calif. (down to 76.7% from 87.5%); Raleigh, N.C. (down to 56% from 65.6%); and Birmingham, Ala. (down to 31.3% from 40.5%).

While it might seem like doom and gloom in the real estate market as profits go, there were pockets of increases in profits between the two quarters in markets with a population of at least 1 million people, too.

They included Milwaukee (up 54.9% from 51.4%); Miami (up 70.9% from 68%); Cincinnati (up 53.4% from 50.6%); Nashville, Tenn. (up 58.7% from 56.4%); and Grand Rapids, Mich. (up 75.3% from 73%).

Nationally, the median price of a home in the third quarter was $339,815, down 2.7% from $349,266 in the second quarter but up about 9.4% from $310,500 in the third quarter of last year.

“If the Federal Reserve’s objective was to slow down the housing market, it succeeded spectacularly,” Sharga said. “The market has gone from double-digit annual home price appreciation to below 3%, and declining quarter-over-quarter prices."

“But," he continued, "the impact of 6% and 7% mortgage rates means that many homes are still out of the reach of prospective buyers, even with prices declining slightly."

The biggest price declines in home prices in metropolitan areas with a population of at least 1 million included San Francisco (down 13%); San Jose, Calif. (down 8.3%); New Orleans (down 7.5%); Seattle (down 7.2%); and San Diego, (down 5.3%).

Other highlights from the ATTOM study included:

  • Homeowners who sold their homes in the third quarter had owned their homes for an average of 5.98 years, up from 5.84 years in this year’s second quarter, but still down from 6.28 years in 2021’s third quarter.
  • Home sales following foreclosures by banks and other lenders represented just 1% of all U.S. single-family home and condo sales in the third quarter — tied for the lowest portion since at least 2000.
  • All-cash purchases accounted for 35.7% of all single-family and condo sales in the third quarter, down from 36% in the second quarter but still up from 33.9% in the third quarter of 2021.
  • Institutional investors accounted for 6.7%, or one of every 15 single-family home purchases, in the third quarter, up from 6.4% in the second quarter but still down from 8.4% in the third quarter of 2021.
  • Buyers using Federal Housing Administration (FHA) loans comprised 7.9% of all single-family home purchases in the third quarter, up from 6.7% in the second quarter but remained down from 8.2% in 2021’s third quarter.
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