Profit margins stagnate despite price surges
Home sellers in the US saw profit margins remain relatively flat during the spring buying season, despite the median home price reaching a new high of $365,000.
According to ATTOM’s Home Sales Report, typical single-family home and condo sales brought a 55.8% profit margin in the second quarter of 2024. This is a slight increase from the first quarter but down one percentage point from the same period last year.
While the national median home price hit a new high of $365,000 during the spring buying season, this surge wasn’t enough to significantly boost profit margins. The rise in home prices did help push raw profits for sellers to over $130,000, nearing a new all-time peak, but it didn’t translate into broader profit margin increases due to the already high prices at the time of initial purchase.
“The second-quarter profit report offers a mixed bag of plusses and minuses that added up to an overall picture of not much change for sellers,” ATTOM chief Rob Barber said in the report. “Prices jumped back upward, which was great news for owners. So did raw profits. Profit margins also remained historically elevated.”
However, Barber explained that the bottom-line profit-margin trend didn’t move much at all because the profit gains did not keep pace with the rapid increase in home prices over the past year.
Geographically, profit margins increased quarterly in 58.8% of the 160 metropolitan statistical areas analyzed but remained down annually in 62.5% of these metros. Higher-priced markets, where home values mostly topped $350,000, saw the most significant year-over-year softening of profit margins.
Despite these trends, returns on investment for median-priced home sales during the second quarter surpassed 50% in 66.3% of the metro areas analyzed. While this represents a decline from the previous year, it remains significantly higher than levels seen five years ago.
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The spring buying season of 2024 spurred both quarterly and annual price surges, with the median price of single-family homes and condos jumping from $335,000 in the first quarter to $365,000 in the second quarter. Prices increased quarterly in 95.7% of the metro areas analyzed and annually in 89.6%, hitting new highs in about 75% of these markets.
“Even greater price improvements will be needed to kick margins up over the rest of the year,” Barber said.
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