ATTOM's year-end 2023 home sales report found that home sellers made an average profit of $121,000 on their sales, resulting in a 56.5% return on investment. Although this represents a substantial profit, it marks the first decline in both gross profits and profit margins since 2011.
The gross profit on median-priced single-family home sales fell from $122,600 in 2022, while the profit margin decreased from 59.8% year-over-year. These declines were influenced by the slowest annual growth in the national median home price in over a decade.
The housing market experienced fluctuations throughout 2023, with flat prices early in the year, followed by a spring spike and a fourth-quarter slowdown. These fluctuations were driven by various factors, including strong employment and investment markets, tight housing supply, and rising mortgage rates.
“Last year certainly stood out as another very good year for home sellers across most of the United States. Typical profits of over $120,000 and margins close to 60 percent were still more than double where they stood just five years earlier,” said Rob Barber, CEO at ATTOM. “But the market definitely softened amid modest price gains that weren’t enough to push profits up higher after a long run of improvements."
Sellers in western and southern states reaped the highest returns on investment in 2023, with metro areas like San Jose, California; Knoxville, Tennessee; and Seattle, Washington, leading the way.
The U.S. median home price increased by 2.1% from 2022 to 2023, reaching an all-time high of $335,000. While this was the smallest annual increase during the extended housing boom, it reflected the impact of rising interest rates.
Homeownership tenure increased to a two-year high in the fourth quarter of 2023, with homeowners owning their homes for an average of 7.96 years. Cash purchases accounted for 38% of all single-family home and condo sales in 2023, the highest level since 2014.
Institutional investor activity declined slightly in 2023, representing 6.1% of all sales. Meanwhile, the use of Federal Housing Administration (FHA) loans increased to 8.8%, reversing a three-year decline.
What does this mean for 2024?
"In 2024, the stage seems set for more small changes in prices as well as seller gains given the competing forces of interest rates that have headed back down in recent months and home supplies that remain tight, but home ownership costs that remain a serious financial burden for many households," Barber said.
