Profit margins on sales of median-priced single-family homes and condos in the United States shrank to 54.6% in the third quarter, according to a new report from the real estate data firm ATTOM.
It was the first decline in home prices in nearly three years, down from 57.6% in the second quarter, with the national median home value falling 3% per quarter to around $340,000, the report said.
Despite this drop, home sellers’ return on investment is still up from 48.8% in the third quarter of 2021, and still at near-record levels since the century (20 points higher than two years ago). year). The median home price is also still at an all-time high, more than double what it was 10 years ago, according to the report.
On the other hand, the decline in investment returns during this year’s summer home sales season marked the largest quarterly decline since 2011, with the third-quarter reversal also marking the first since 2010 that sellers’ returns decreased from the second to the third quarter.
This coincides with a drop in gross profits during this period, with the typical sale of single-family homes and condos dropping 6% to $120,100, the largest quarterly decline since the start of 2017.
The report attributes the declines to “increasing headwinds that threaten to end or significantly slow the decade-long housing market boom,” including a doubling of average mortgage ratesa plummeting stock market, a 40-year high in consumer price inflation and a doubling of foreclosures by lenders.
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ATTOM says these factors increase ownership costs for buyers, which it says “reduces the resources available for down payments on purchases” and impacts the overall household budget. This has led to an increase in the supply of homes for sale and, in turn, has pushed falling house prices (but not in all markets).
Metro results for door-to-door sellers
Although profit margins, or the percentage change between median purchase and resale prices, generally declined from the second to third quarters of 2022 in 68% of metropolitan statistical areas (127 of 186), returns were still in decline. increase each year in 148 of these markets. (78%)
The report indicates that the largest quarterly declines in typical profit margins occurred in metropolitan areas of:
- Claramont-Liban, NH (down from 72.8% in Q2 to 52.4% in Q3)
- San Francisco, CA (down from 85.1% in Q2 to 65.4% in Q3)
- Prescott, AZ (down from 86.3% in Q2 to 70.8% in Q3)
- Barnstable, MA (down 74.5% to 59.6% in Q3)
- Trenton, NJ (down from 74.5% to 61% in Q3)
ATTOM also found that only 59 of 186 (32%) markets that saw their profit margins increase in the third quarter, with the largest quarterly increases including:
- Macon, GA (from 44.7% in Q2 to 82.4% in Q3)
- Rockford, IL (from 29.9% in Q2 to 41.8% in Q3)
- Davenport, IA (from 29.2% in Q2 to 40% in Q3)
- Akron, OH (up 52.8% in Q2 to 60.3% in Q3)
- Hilo, HI (up 103.3% in Q2 to 110.9% in Q3)
The report also found that metro areas with at least one million residents saw the largest quarterly declines in profit margin in San Francisco, Seattle, San Jose, Raleigh and Birmingham. Milwaukee, Miami, Cincinnati, Nashville and Grand Rapids are larger markets seeing increases in profits.
Cash sales and institutional investors
Cash purchases continue to make up a large share of single-family home and condo sales, accounting for 35.7% of all sales in Q3 2022. That’s down slightly from 36% last quarter, but still above 33.9%. sales in Q3 2021.
The markets with the highest share of all-cash purchases are Columbus, GA (76.8%), Augusta, GA (76.6%), Gainsville, GA (68.3%), Myrtle Beach, SC (67 .3%) and Atlanta, GA (61.9%). ). Cash sales accounted for the smallest share of all transactions in Lincoln, NE (14.9%), Valleja, CA (17.6%), San Jose, CA (18.8%), Kennewick, WA (19 .4%) and Spokane, WA (20.2%).
These high levels of cash offers also coincide with an uptick in institutional investment purchases, accounting for 6.7% of all single-family home purchases in the third quarter. While this figure is up from 6.4% last quarter, it is also down from 8.4% in the same period last year.
FHA funded purchases
Another interesting trend seen in the third quarter is the increase in Federal Housing Administration (FHA) loans, which now account for 7.9% of all third quarter home purchases (one in 13). This is up from 6.7% in the second quarter of 2022, which represents the first quarterly gain of last year.
