It’s a tough market — but a profitable one for sellers
The latest ATTOM home sale report found that second-quarter profit margins rose for the first time in a year.
Key points:
- Profit margins and gross profits were both up in Q2.
- Home prices increased in 150 of the 156 markets studied.
- For sellers who are also buying in the same market, those profits may simply get funneled into a more expensive home due to rising prices.
If real estate agents need some ammunition to help their hesitant sellers get off the fence, new data on rising profit margins could do the trick.
The profit margin on sales of single-family homes and condominiums rose to 47.7% in the second quarter, according to ATTOM's U.S. home sales report. That's up from 43.9% in the first quarter, and it's the first gain in a year.
It's also another sign of the surprising rebound in prices, which put seller profits back up to nearly their highest level in the past decade, said Rob Barber, CEO at ATTOM.
"It's way too early to predict another long-term price run-up, especially since buying a home is a financial stretch for so many households around the country," Barber said. "But the second-quarter numbers clearly show the market has more steam left in it, and sellers are reaping the benefits."
Gross profits for a typical single-family home and condo sale also jumped between the first and second quarter, rising 17% to $113,000. Nearly 90% of the markets analyzed posted a quarterly increase in raw profits, according to the report.
While up quarter-to-quarter, gross profits are down 5% from a year ago — when rising interest rates were just starting to slow the market.
Price increases were seen across nearly all of the U.S. Out of 156 metro areas studied, 150 had quarter-to-quarter price increases. On an annual basis, prices rose in 60% of those metro areas.
While profits were up in the second quarter, Barber acknowledged that it's still tough for sellers who are looking for another home in the same area.
"Current sellers who need to stay in the same local market are looking at having to put those profits into a much-higher priced home compared to when they bought what they own now," Barber said in an email. "Whatever way prices go, the next purchase is going to be a lot more expensive than the last one for sellers who need to upsize in the same market."
Cash offers drop, homeownership tenure up
The report also found that despite interest rates hovering in the mid-to-upper 6% range this spring, all-cash purchases accounted for fewer overall home purchases in the second quarter. ATTOM estimated 35.9% of overall sales were all-cash offers, down from 39% in the first quarter and unchanged from a year ago, before interest rates spiked.
After hitting a 10-year low in the first quarter of 2023, the amount of time homeowners are staying in place has started to rise again. In the second quarter, the average tenure was 5.76 years, up from 5.59 years in the first quarter. Areas with the longest tenures were along the East and West Coasts, with Bellingham, Wash., taking the top spot at just over eight years. At the other end of the spectrum, Lakeland, Florida, sellers averaged just under 1.5 years in their homes.