Profit margins on median-priced single-family home and condo sales dropped from 57.6 percent in the second quarter to 54.6 percent in the third quarter, as home prices declined for the first time in almost three years, according to ATTOM’s third-quarter home sales report.
The drop-off in typical profit margins came as the median national home value went down 3 percent quarterly, to roughly $340,000.
“Rapidly-rising mortgage rates have not only resulted in fewer home sales, but have begun to impact home prices as well,” ATTOM Executive Vice President of Market Intelligence Rick Sharga said in a release. “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.”
Typical investment returns for homesellers did remain up from 48.8 percent in the third quarter of 2021 and were still at near-record levels for this century. The national median home price also stayed near its all-time high, more than double where it stood a decade earlier.
But the investment-return decline during this summer’s homeselling season marked the largest quarterly downturn since 2011 and the first time since 2010 that seller returns went down from the second quarter to third quarter.
Gross profits also decreased quarter-over-quarter, dropping 6 percent on the typical single-family home and condo sale to $120,100. The decrease was the largest since early 2017.
Typical profit margins decreased from the second to third quarter in 68 percent of the metro areas analyzed by ATTOM. The biggest quarterly decreases came in Claremont-Lebanon, N.H. (down from 72.8 percent to 52.4 percent), San Francisco (85.1 percent to 65.4 percent), Prescott, Ariz. (86.3 percent to 70.8 percent), Barnstable, Maine (74.5 percent to 59.6 percent) and Trenton, N.J. (74.5 percent to 61 percent).
The biggest quarterly increases in profit margins were in Macon, Ga. (up from 44.7 percent to 82.4 percent), Rockford, Ill. (29.9 percent to 41.8 percent), Davenport, Iowa (29.2 percent to 40 percent), Akron, Ohio (52.8 percent to 60.3 percent) and Hilo, Hawaii (103.3 percent to 110.9 percent).
Median home prices in the third quarter decreased from the second quarter or stayed the same in 98 of the metro areas analyzed, although they were still up annually in 97 percent of those metros. Nationally, the median price of $339,815 in the third quarter was down 2.7 percent from $349,266 in the second quarter, but still up 9.4 percent from $310,500 in the third quarter of last year.
“If the Federal Reserve’s objective was to slow down the housing market, it has succeeded spectacularly,” Sharga said. “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.”
The biggest decreases in median home prices from the second to the third quarter were in San Francisco (down 13 percent). Charleston, N.C., Crestview-Fort Walton Beach, Fla. (down 11.3 percent), San Jose, Calif. (down 8.3 percent) and Naples, Fla. (down 8.2 percent).
The largest increases were in Trenton, N.J. (up 14.6 percent), Albany, N.Y. (up 8.7 percent); New York (up 7.5 percent); Wichita, Kan. (up 7.1 percent) and Philadelphia (up 6.7 percent).
Homeowners who sold in the third quarter had owned their homes an average of 5.98 years. That was up from 5.84 years in the second quarter, but still down from 6.28 years in the third quarter of 2021.
The longest average tenures among sellers in the third quarter were in Manchester, N.H. (8.92 years), Kahului-Wailuku, Hawaii (8.26 years), Claremont-Lebanon, N.H. (8.22 years), Bridgeport, Conn. (7.89 years) and Honolulu (7.88 years).
The smallest average tenures among third-quarter sellers were in Lakeland, Fla. (1.32 years), Bremerton, Wash. (1.88 years), Gainesville, Ga. (2.48 years), Raleigh, N.C. (3.24 years) and Portland, Maine (3.24 years).
All-cash purchases accounted for 35.7 percent of all single-family home and condo sales in the third quarter, down slightly from 36 percent in the second quarter but still up from 33.9 percent in the third quarter of last year.
Metro areas where cash sales represented a large share of all transactions in the third quarter included Columbus, Ga. (76.8 percent), Augusta, Ga. (76.6 percent); Gainesville, Ga. (68.3 percent); Myrtle Beach, S.C. (67.3 percent) and Atlanta (61.9 percent).
Those where cash sales represented some of the smallest share of all transactions included Lincoln, Neb. (14.9 percent of all sales), Vallejo, Calif. (17.6 percent), San Jose, Calif. (18.8 percent), Kennewick, Wash. (19.4 percent) and Spokane, Wash. (20.2 percent).