In the latest U.S. Home Sales Report for the third quarter of 2023, ATTOM highlighted that profit margins for median-priced single-family homes and condos in the U.S. have surged to 59%. This is the second consecutive quarterly gain following several drops.
The uptick, from 56.6% in Q2 2023, is synchronized with the ongoing rebound in the U.S. housing market, leading to a 2% increase in the median nationwide home price, settling at a record $350,000. This rebound contrasts with the unusual dip observed from mid-2022 to early 2023 that threatened to end the market's decade-long boom.
However, even with the recent gains, the typical investment return was still beneath the 62% of Q3 2022 and 62.3% of Q2 2022.
“Prices and profits around the U.S. got another boost over the summer as the housing market continued recovering from last year’s setbacks,” said Rob Barber, CEO for ATTOM. “Things do remain uncertain heading into the market’s annual Fall slowdown, especially at a time when mortgage rates are rising again, home affordability is getting tougher, and the potential for a recession hangs in the air. But the latest gains fell in line with what we often see during the third quarter and showed that any predictions of an extended market fallback may have been premature.”
Furthermore, raw profits on single-family home and condo sales nationwide saw a 5% quarterly increase, amounting to $129,900, marking a 3.2% annual rise.
The persistent low housing supply is a significant factor contributing to these gains. This scarcity puts a premium on house prices, indirectly pushing up profits. But, this upward trajectory is threatened by rising mortgage rates, nearing an average of 8% for a 30-year fixed loan. External economic pressures like the re-emergence of consumer-price inflation, a declining stock market, and a national unemployment rate nearing 4% also loom over the market.
Insights from the report also showed that typical profit margins increased in 85 of the 155 metropolitan statistical areas. Significant quarterly profit-margin surges were noted in metro areas like Scranton, Penn.; Reading, Penn.; Flint, Mich.; Evansville, Ind.; and Roanoke, Va. Conversely, some areas, such as Lake Havasu City, Ariz., and Albany, N.Y., observed a quarterly decline.
Other notable findings include:
- The average homeownership tenure rose to 7.86 years, the second-highest since 2000.
- Foreclosure sales continued to be minimal, representing only 1.4% of U.S. home and condo sales in Q3 2023.
- All-cash purchases made up 36.6% of sales, a slight increase from the previous quarter.
- Institutional investment dropped to 5.9%, the lowest since Q4 2020.
- FHA-financed purchases saw a quarterly decline but an annual increase, comprising 8.8% of all purchases.
