Seller Profit Margins Drop Significantly, According to a Report
ATTOM: Despite remaining at record highs, profit margins on median-priced single-family home sales declined to 47.2% in the first quarter of 2022, from 51.6% in the fourth quarter of 2021.
IRVINE, Calif. — Home prices continue to rise, but seller profits may be decreasing from recent highs. However, most sellers continue to make big profits, and earnings are currently at historical highs.
In the first quarter, profit margins on median-priced single-family home sales in the United States plummeted to 47.2%. According to a recent analysis provided by ATTOM Data Solutions, it was the first quarterly fall since late 2019 and the largest in a decade. The profit margin in the first quarter was down from 51.6% in the fourth quarter of 2021.
However, profit margins — the percentage difference between median purchase and resale prices – frequently fall during the slower winter home buying seasons. However, the most recent drop of more than four percentage points was bigger than usual.
“Home prices simply cannot continue to rise at the rate they have in recent years,” says Rick Sharga, executive vice president of market intelligence at ATTOM. “The combination of increased prices, rising mortgage rates, and the greatest rates of inflation in 40 years may be pricing some prospective buyers out of the market, implying that sales figures may begin to fall.” Finally, as price decreases, price growth should slow down.”
Santa Barbara, California (margin down from 72.9% in the fourth quarter of 2021 to 45.8% in the first quarter of 2022); Boise, Idaho (down from 110.4% to 88.8%); Brownsville, Texas (down from 54.3% to 38.1%); St. Louis (down from 37.6% to 23.9%); and Des Moines, Iowa (down from 37.6% to 23.9%) (down from 48.1% to 35.2%).
Other early signals of normalization have emerged in the real estate market. Contract signings fell in March, the fifth consecutive month that pending home sales fell, according to the National Association of Realtors®.
Source: “Home Sales, Seller Profits Dip Across U.S. in First Quarter of 2022 as Price Increases Slow,” ATTOM Data Solutions (April 27, 2022)
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