How long will this last?
Homeowners across the US continue to see strong returns from selling their homes, even as profit margins slip slightly, according to ATTOM’s new report.
The report shows that homeowners earned a 55.6% profit margin on typical single-family home and condo sales during the third quarter, down just a little from earlier this year but still far above historical levels.
While the national median home value stayed steady at around $360,000, typical raw profits for sellers hovered just below an all-time high at $128,700. Although these profits dipped 0.9% compared to the previous quarter, they still represent a 2.7% increase from the same period last year.
"The latest price and profit numbers provided another round of generally good news for homeowners, tempered by a bit of a downside," said Rob Barber, CEO of ATTOM. "Home values remained at or near record levels around large swaths of the country, keeping seller profits far above historical levels. At the same time, though, the housing market settled down after a big second quarter, which extended a slow fallback in profit margins that started last year.”
Margins continue to slip
Despite the high returns, profit margins, the percentage difference between the purchase and resale price, have continued to decline from their peak of 64.3% in 2022. Over half of the metro areas ATTOM analyzed saw margins drop from the second to third quarter this year, and almost three-quarters experienced a year-over-year decline.
The slight softening in profit margins is being felt across markets, from areas where homes are priced under $250,000 to those where homes cost over $450,000. Still, two-thirds of metro areas had profit margins exceeding 50%, a level far higher than what was seen five years ago.
Though profit margins have been shrinking, the actual dollar amount sellers are earning has remained relatively stable. The typical raw profit of $128,700 in Q3 was just slightly lower than earlier this year and still near the $135,000 record reached in 2022.
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While year-over-year profits were up 2.7%, the report shows that almost half of the metro areas experienced flat or lower profits from July to September this year.
“If history is a good guide, the fourth quarter is likely to bring more of the same as the peak buying season ends," Barber said in the report. "This is far from a warning sign that the long market boom is ending. But there certainly are forces that could cut either way, especially as affordability remains a challenge for so many potential buyers."
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