Home seller profits at two-year low: report

by Adam Barnes - 04/28/23 12:05 PM ET

House prices — AP/Nam Y. Huh
An advertising sign for building land stands in front of a new home construction site in Northbrook, Ill., Thursday, May 5, 2022. Record low-interest mortgages are long gone. Credit card rates will likely rise. You’ll pay more for an auto loan. The unusually large three-quarter point hike, Wednesday, June 15, in the Fed’s benchmark short-term rate is going to have a lot of impacts on Americans’ finances. The hope is that by making borrowing more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services and slow inflation (AP Photo/Nam Y. Huh)

Home seller profits declined again in the first quarter of the year due to flat and, in some areas, falling prices, according to a new report released by nationwide property data provider ATTOM.

Profit margins on typical home sales hit a two-year low, dropping from 48.7 percent in the fourth quarter of 2022 to 44.2 percent in the first quarter of 2023. National median home prices increased just 1 percent, to $321,135.

“Homeowners are starting to take a significant hit in the form of lost profits from the recent market slowdown. 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,” said Rob Barber, chief executive officer for ATTOM.

The report shows profits have declined as median home prices fell from their record highs in the second quarter of last year as the Federal Reserve attempts to fight inflation through rate hikes.

Mortgage rates shot up dramatically in the back half of 2022, which weakened demand and led to moderating home prices.

Median home prices were down quarterly or remained the same in three-quarters of metro areas analyzed by ATTOM. The biggest quarterly decreases were seen in Toledo, Ohio; Trenton, N.J.; Pittsburgh; Detroit; and San Francisco.

Meanwhile, the report shows that cash purchases hit historic highs in the first quarter. All-cash purchases made up 39.3 percent of single-family home and condo sales — the highest level since 2013.

“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,” Barber added.

Mortgage rates rose for the second straight week to 6.43 percent, new Freddie Mac data shows. But economists expect them to fall as the year progresses.

“Incoming data suggest the housing market has stabilized from a sales and house price perspective,” Freddie Mac Chief Economist Sam Khater said. “The prospect of lower mortgage rates for the remainder of the year should be welcome news to borrowers who are looking to purchase a home.”