Changing Real Estate Market Hurts Sellers Too

ATTOM: Seller profit margins – the change between median purchase and resale prices – fell to 54.6% in 3Q, down from 57.6% in the second quarter.

IRVINE, Calif. – According to ATTOM’s third-quarter 2022 U.S. Home Sales Report, profit margins on median-priced single-family home and condo sales across the United States decreased to 54.6% as home prices declined for the first time in almost three years. Seller profit margins are the change between median purchase prices and resale prices.

The drop-off in typical profit margins, from 57.6% in the second quarter, came as the median national home value went down 3% quarterly, to roughly $340,000.

“Rapidly-rising mortgage rates have not only resulted in fewer home sales, (they’ve) begun to impact home prices as well,” says Rick Sharga, executive vice president of market intelligence at ATTOM. “Because homebuyers face “serious affordability challenges with monthly payments in some markets up 50% year-over-year, it’s very likely that home prices will continue to weaken in many markets in the coming months.”

Year-to-year investment returns are still higher, however, up from 48.8% in the third quarter of 2021. They also remain near record levels currently, but ATTOM says the investment-return decline this summer marked the largest quarterly downturn since 2011, when the nation was mired in the aftereffects of the Great Recession 

“If the Federal Reserve’s objective was to slow down the housing market, it has succeeded spectacularly,” notes Sharga. “The market has gone from double-digit annual home price appreciation to below 3%, and declining quarter-over-quarter prices. But the impact of 6% and 7% mortgage rates means that many homes are still out of the reach of prospective buyers, even with prices declining slightly.”

Other 3Q report take-aways

  • Median home prices in the third quarter of 2022 decreased quarter-to-quarter or stayed the same in 98 of the 186 metro areas with enough data to analyze, though they were still up year-to-year in 180 of those metros. Nationally, the median price of $339,815 in the third quarter was down  from $349,266 quarter-to-quarter but up from $310,500 year-to-year.
  • The biggest decreases in median home prices quarter-to-quarter were in San Francisco (down 13); Charleston, N.C. (down 12.8); Crestview-Fort Walton Beach, Fla. (down 11.3); San Jose, Calif. (down 8.3) and Naples, Fla. (down 8.2).
  • Homeowners who sold in 3Q 2022 owned their homes an average 5.98 years. That’s up from 5.84 years in 2Q 2022, but down from 6.28 years, year-to-year. Nineteen of the 25 longest average tenures among sellers in the third quarter of 2022 were in the Northeast or West regions.
  • 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).
  • Lender-owned foreclosures remain at a century low point and represented just 1% of all U.S. single-family home and condo sales in the third quarter of 2022 – tied for the lowest portion since at least 2000. That’s the same level recorded in 2Q and down 1.2% year-to-year.
  • Cash sales remain near an eight-year high, accounting for 35.7% of all single-family home and condo sales in 3Q. It’s a slight drop from the second quarter and up 33.9% year-to-year.
  • Institutional investors nationwide accounted for 6.7% – one of every 15 single-family home purchases – in 3Q, up from 6.4% in the second quarter and down from 8.4% year-to-year.

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