IRVINE, Calif. – A report by Attom Data found that home-seller profits across the country fell as home prices declined for the first time in nearly three years.
In 3Q2022, the profit margin on a median-priced single-family home or condominium was 54.6 percent, down from 57.6 percent in the second quarter. This came as the median national home price fell 2.7 percent over the quarter to $339,815.
While seller returns are falling, they are still above where they typically have been. This time last year, seller profits were 48.8 percent, around 20 percent higher than it was two years prior.
“While profit margins may have already peaked according to Attom’s study, a profit margin of over 50 percent is nothing to be sad about,” said Joshua Roberson, lead data analyst for the Texas Real Estate Research Center at Texas A&M University. “Most homeowners who have been in their homes for several years and are looking to sell have already benefited greatly from the price hikes experienced in the past few years.”
Despite lower returns, more homes are being put on the market.
“At least in Texas, the rate of new listings is growing at a rate consistent with pre-pandemic years and are outpacing home sales,” said Roberson. “For the time being, that means more housing options.”
Gross profits decreased 6 percent on the typical single-family home and condo sale across the country to $120,100. It’s the largest quarterly decrease since early 2017.
The third-quarter profit and price trends emerged amid rising interest rates, elevated inflation, and increasing foreclosure activity. These forces have raised homeownership costs for buyers. For more, read “Home Stretch: Buyers Feel Pinch of Rising Interest Rates.“
Homeowners who sold in 3Q2022 had owned their homes for an average of 5.98 years. That was up from 5.84 years in 2Q2022, but still down from 6.28 years in 3Q2021.
For many households, the lack of affordable housing prevents them from moving out of their current home, said Roberson. But it’s a different story for higher-income households.
“The massive drop in mortgage rates at the start of the pandemic was too much to pass up,” he said, “resulting in a lot of households trading up their homes.”
Roberson says more about housing tenure in “Staying Put: Housing Tenure’s Market Influence.”
Here are more insights from Attom’s third quarter report:
Foreclosures remain at century low. Home sales following foreclosures represented just 1 percent of all U.S. single-family home and condo sales, tied for the lowest portion since at least 2000.
Nationwide, all-cash purchases accounted for 35.7 percent of all single-family home and condo sales, down quarterly but up annually.
One of every 15 purchases nationwide was made by institutional investors, up slightly from the second quarter but still down from third quarter 2021.
Nationwide, buyers using Federal Housing Administration loans comprised 7.9 percent of all single-family home purchases in 3Q2022, down from the same quarter last year but up since 2Q2022.
The Texas Real Estate Research Center has a wealth of economic information online for free.