Profit margins on median-priced single-family home and condo sales decreased nationwide to 44.2% as home prices stayed flat or continued to decline, according to a report from ATTOM.
The curator of land, property, and real estate data on Thursday released its first-quarter 2023 U.S. Home Sales Report, which showed that the drop in typical profit margins, from 48.7% in the fourth quarter of 2022, marked the third straight quarterly decrease nationwide and resulted in the lowest investment return since mid-2021.
The drop came as the national median home price rose just 1% from the previous quarter to $321,135, and values commonly fell in almost three-quarters of major U.S. housing markets.
The typical investment return nationwide did remain high in the first quarter — almost double where it stood four years ago, ATTOM said. But the margin was off by 12 basis points from the peak of 56.1% hit in the second quarter of last year.
'A Significant Hit'
“Homeowners are starting to take a significant hit in the form of lost profits from the recent market slowdown,” said ATTOM CEO Rob Barber. “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.”
He continued, “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.”
The latest round of falling profits and prices around the U.S. reflects a housing market that has been stalled since the middle of last year following a decade of almost continuous gains, ATTOM said. The nationwide median home price fell 7% from the record set in the second quarter of last year.
That happened as home mortgage rates doubled to more than 6% for a 30-year fixed-rate loan; consumer price inflation soared to 40-year highs; and the stock market fell from all-time records, ATTOM said. Those forces cut into what prospective home buyers could afford, helping to tamp down demand and lower prices despite the continuing low inventory of homes for sale.
As the 2023 home-buying season kicks into gear, the forecast for the market remains murky, ATTOM said. Small declines in mortgage and inflation rates over the past few months have come amid predictions among economists of more interest rate hikes and a possible recession.
By Region
Typical profit margins — the percentage difference between the median purchase price and the resale price — stayed the same or declined from the fourth quarter of 2022 to the first quarter of 2023 in 93 (68%) of the 137 metropolitan statistical areas around the U.S. with sufficient data to analyze, the report states.
Profit margins were flat or fell in 123, or 90%, of those metros compared to the second quarter of last year, when returns nationwide hit a high point, ATTOM said. Metro areas were included if they had a population greater than 200,000 and at least 1,000 single-family home and condo sales in the first quarter of 2023.
The biggest quarterly decreases in typical profit margins came in the metro areas of Akron, Ohio (margin down from 66.7% in the fourth quarter of 2022 to 47.8% in the first quarter of 2023); Stockton, Calif. (down from 76.7% to 59.4%); Louisville, Ky. (down from 48.6% to 32%); Prescott, Ariz. (down from 73.3% to 58.1%) and Buffalo, N.Y. (down from 66.2% to 51.5%).
Other than Louisville and Buffalo, the biggest quarterly profit-margin decreases in metro areas with a population of at least 1 million in the first quarter of 2023 were in St. Louis (return down from 33.7% to 23.6%); San Francisco (down from 58.9% to 49.1%); and Salt Lake City, Utah (down from 53.6% to 44.5%).
Typical profit margins increased quarterly in just 44 (32%) of the 137 metro areas analyzed. The biggest quarterly increases were in Trenton, N.J. (margin up from 43.6% in the fourth quarter of 2022 to 78.6% in the first quarter of 2023); Scranton, Pa. (up from 63.3% to 87.5%); Lake Havasu City, Ariz. (up from 63.6% to 82.8%); Atlantic City, N.J. (up from 33.2% to 48.5%) and Reading, Pa. (up from 53.9% to 68.8%).
The largest quarterly increases in profit margins among metro areas with a population of at least 1 million came in Pittsburgh (up from 47.8% to 53.1%); Memphis, Tenn. (up from 46.3% to 51.1%); Richmond, Va. (up from 52.1% to 55.6%); Indianapolis, Ind. (up from 46.7% to 50%); and Grand Rapids, Mich. (up from 64.4% to 67.1%).
Other Highlights
- Median home prices in the first quarter of 2023 decreased or remained the same compared to the prior quarter in 104 (75%) of the 139 metro areas nationwide with enough data to analyze, although they were still up annually in 102 (73%) of those metros.
- Nationally, the median first-quarter price of $321,135 rose 1% from $318,000 in the fourth quarter of 2022 and was up 1.6% from $316,000 in the first quarter of last year.
- The biggest decreases in median home prices from the fourth quarter of 2022 to the first quarter of 2023 were in Toledo, Ohio (down 13.7%); Trenton, N.J. (down 13.3%); Pittsburgh (down 11.1%); Detroit (down 9.5%) and San Francisco (down 8.8%).
- Home prices hit new highs in the first quarter in only six of the 139 metro areas in the report.
- The largest increases in median prices from the fourth quarter of 2022 to the first quarter of 2023 came in Ogden, Utah (up 7.2%); Naples, Fla. (up 6%); Savannah, Ga. (up 5.8%); Fort Myers, Fla. (up 5%) and Crestview-Fort Walton Beach, Fla. (up 4.9%).
- The smallest average home ownership tenures among first-quarter sellers were in Lakeland, Fla. (1.22 years); Memphis, Tenn. (2.92 years); Cleveland (3.83 years); Tucson, Ariz. (3.95 years); and Salem, Ore. (4.08 years).
- Nationwide, all-cash purchases accounted for 39.3% of single-family home and condo sales in the first quarter, the highest level since the first quarter of 2013. The latest portion was up from 37.9% in the fourth quarter of 2022 and up from 36.9% in the first quarter of last year.
