ATTOM: 1Q Home Sales, Seller Profits Decline
ATTOM, Irvine, Calif., said profit margins on median-priced single-family home sales across the United States dipped to 47.2 percent in the first quarter – the first quarterly decline since late 2019 and the largest in a decade.
The company’s quarterly U.S. Home Sales Report also reported profit margins were down from 51.6 percent in the fourth quarter.
The report said typical return on investment remained historically high, easily topping the 37.5 percent level recorded a year ago and nearly 20 points above the 29.4 percent figure from first quarter 2019.
Gross profits, while also near record highs, followed a similar pattern in the first quarter. The typical single-family home sale across the country generated a gross first-quarter profit of $103,000, down from $107,187 in the fourth quarter, although still well above $75,001 a year earlier.
“Home prices simply can’t continue to go up as rapidly as they have for the past few years,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “The combination of higher prices, rising mortgage rates and the highest rates of inflation in 40 years may be pricing some prospective buyers out of the market, which means we may begin to see lower sales numbers. Ultimately, as affordability worsens, price appreciation should slow down, and we may even see modest price corrections in some markets.”
ATTOM said the lower gross profits came as the national median home price increased just 1.7 percent, from $315,000 in the fourth quarter to $320,500 in the first quarter, marking the ninth straight quarterly record, and up 16.5 percent from a year ago. But the modest quarterly gain fell below price spikes that first-quarter sellers commonly were paying when they originally bought their homes, which led to the decline in profits.
Home sales also lagged behind from a year ago, with sales falling from 1.2 million to 1.1 million. Sharga said these sales, pricing and profit trends point to the possibility of a calmer period in a housing market that has largely roared ahead over the past two years, in spite of and because of the ongoing economic threat posed by coronavirus pandemic that hit early in 2020.
The report said typical profit fell from the fourth quarter to the first quarter in 71 (42 percent) of the 170 metro areas around the U.S. with sufficient data to analyze. That trend emerged even as investment returns remained up annually in 152 (89 percent) of those metros.
The report also noted homeowners who sold in the first quarter had owned their homes an average of 5.72 years, down from 6.12 years in the fourth quarter and down by more than a year from 6.82 years a year ago. The latest figure marked the shortest average time between purchase and resale since second quarter 2011.
Tenure decreased from the first quarter of 2021 to the same period this year in 94 percent
“Existing home sales typically account for 80-90 percent of all home sales, and increased homeownership tenure over the past decade has had an impact on the inventory of homes available for sale,” Sharga said. “If we continue to see a reversal of that trend, it could bring desperately needed supply back to the market, which would help stabilize prices.”
