RISMedia

Home-Seller Profits Drop in Q3 as Housing Market Boom Eases

By RISMedia Staff

Profit margins on median-priced single-family home and condo sales decreased to 54.6% as home prices declined for the first time in almost three years, according to a new report from ATTOM released this week.
 
ATTOM’s third-quarter 2022 U.S. Home Sales Report found that the drop-off in typical profit margins, from 57.6% in Q2 2022, came as the median national home value went down 3% quarterly, to roughly $340,000. However, the report also found that typical investment returns for home sellers did remain up from 48.8% in the third quarter of 2021 and were still at near-record levels for this century - some 20 points higher than just two years earlier.

Key highlights:
  • Gross profits decreased, dropping 6% on the typical single-family home and condo sale across the country to $120,100, the largest decrease since early 2017.
  • Typical profit margins decreased in 127 of the 186 metropolitan statistical areas around the U.S. They declined by at least three percentage points in about half of those metro areas, although returns were still up annually in 145 of them.
  • The biggest quarterly decreases in typical profit margins came in the metro areas of Claremont-Lebanon, New Hampshire (from 72.8% to 52.4%); San Francisco, California (from 85.1% to 65.4%); Prescott, Arizona (from 86.3% to 70.8%); Barnstable, Massachusetts (from 74.5% to 59.6%) and Trenton, New Jersey (from 74.5% to 61%).
  • Typical profit margins increased quarterly in just 59 of the 186 metro areas. The biggest quarterly increases were in Macon, GA (from 44.7% to 82.4%); Rockford, IL (from 29.9% to 41.8%); Davenport, IA (from 29.2% to 40%); Akron, OH (from 52.8% to 60.3%) and Hilo, HI (from 103.3% to 110.9%).
  • Median home prices in Q3 of 2022 decreased from the prior quarter or stayed the same in 98 of the 186 metro areas with enough data to analyze, although they were still up annually in 180 of those metros. Nationally, the median price of $339,815 in Q3 was down 2.7% from $349,266 in Q2, but still up 9.4% from $310,500 of last year.
  • The biggest decreases in median home prices were in San Francisco, California (-13%); Charleston, North Carolina (-12.8%); Crestview-Fort Walton Beach, Florida (-11.3%); San Jose, California (-8.3%) and Naples, Florida (-8.2%).
  • Increases in median prices were seen in Trenton, New Jersey (+14.6%); Albany, New York (+8.7%); New York, New York (+7.5%); Wichita, Kansas (+7.1%) and Philadelphia, Pennsylvania (+6.7%).
  • Buyers using Federal Housing Administration (FHA) loans comprised 7.9% of all single-family home purchases in Q3 2022. That was up from 6.7% in Q2 2022, the first quarterly gain in a year, but it still remained down from 8.2% a year earlier.
  • Metro areas with the highest levels of FHA buyers include Bakersfield, California (20.8%); Visalia, California (19.6%); Modesto, California (17.9%); Hagerstown, Maryland (17.3%) and Vallejo, California (16.9%).
Major takeaway:
 
“Rapidly-rising mortgage rates have not only resulted in fewer home sales, but have begun to impact home prices as well,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “With rates the highest they’ve been in over 20 years, homebuyers face serious affordability challenges, with monthly payments in some markets up 50 percent year-over-year. It’s very likely that home prices will continue to weaken in many markets in the coming months.”
 
Added Sharga, “If the Federal Reserve’s objective was to slow down the housing market, it has succeeded spectacularly. The market has gone from double digit annual home price appreciation to below 3 percent, and declining quarter-over-quarter prices. But the impact of 6 and 7 percent mortgage rates means that many homes are still out of the reach of prospective buyers, even with prices declining slightly.”
 
For the full report, which also contains data on home tenures, REO sales, cash sales and institutional investments, click here.


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