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Profit Margins on Typical Home Sales Dip Three Points Quarterly Amid Decline in National Median Price; Investment Returns Remain Near Record Levels, But Decrease at Fastest Pace in 11 Years; Median U.S. Home Value Down 3 Percent Quarterly During Peak Selling Season ATTOM, a leading curator of real estate data nationwide for land and property data, released its third-quarter 2022 U.S. Home Sales Report, which shows that profit margins on median-priced single-family home and condo sales across the United States decreased to 54.6 percent as home prices declined for the first time in almost three years. The drop-off in typical profit margins, from 57.6 percent in the second quarter, came as the median national home value went down 3 percent quarterly, to roughly $340,000. “Rapidly-rising mortgage rates have not only resulted in fewer home sales, but have begun to impact home prices as well,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “With rates the highest they’ve been in over 20 years, homebuyers face serious affordability challenges, with monthly payments in some markets up 50 percent year-over-year. It’s very likely that home prices will continue to weaken in many markets in the coming months.” Typical investment returns for home sellers did remain up from 48.8 percent in the third quarter of 2021 and were still at near-record levels for this century – some 20 points higher than just two years earlier. The national median home price also stayed near its all-time high – more than double where it stood a decade earlier. But the investment-return decline during this year’s summertime home-selling season marked the largest quarterly downturn since 2011, when the nation was mired in the aftereffects of the Great Recession that hit in the late 2000s. The third-quarter reversal also represented the first time since 2010 that seller returns went down from a second quarter to a third quarter period. Gross profits also decreased from the second quarter to the third quarter of 2022, dropping 6 percent on the typical single-family home and condo sale across the country to $120,100. That quarterly decrease was the largest since early 2017. The third-quarter profit and price trends emerged amid growing headwinds that threaten to end or significantly cool down the nation’s decade-long housing market boom. Average mortgage rates have doubled this year, passing 6 percent for a 30-year fixed-rate loan, while the stock market has slumped and consumer price inflation is at a 40-year high. Foreclosure activity by lenders also has more than doubled over the past year. Those forces have raised home-ownership costs for buyers, cut into resources available for down payments on purchases and eaten into overall household budgets. They also have boosted the supply of homes for sale, putting further downward pressure on prices. Profit margins drop quarterly while still up annually across most of U.S. Typical profit margins – the percent change between median purchase and resale prices – decreased from the second quarter of 2022 to the third quarter of 2022 in 127 (68 percent) of the 186 metropolitan statistical areas around the U.S. with sufficient data to analyze. They declined by at least three percentage points in about half of those metro areas, although returns were still up annually in 145 of them (78 percent). The biggest quarterly decreases in typical profit margins came in the metro areas of Claremont-Lebanon, NH (margin down from 72.8 percent in the second quarter of 2022 to 52.4 percent in the third quarter of 2022); San Francisco, CA (down from 85.1 percent to 65.4 percent); Prescott, AZ (down from 86.3 percent to 70.8 percent); Barnstable, MA (down from 74.5 percent to 59.6 percent) and Trenton, NJ (down from 74.5 percent to 61 percent). Aside from San Francisco, the biggest quarterly profit-margin decreases in metro areas with a population of at least 1 million in the third quarter of 2022 were in Seattle, WA (return down from 87.2 percent to 73.7 percent); San Jose, CA (down from 87.5 percent to 76.7 percent); Raleigh, NC (down from 65.6 percent to 56 percent) and Birmingham, AL (down from 40.5 percent to 31.3 percent). Typical profit margins increased quarterly in just 59 of the 186 metro areas analyzed (32 percent). The biggest quarterly increases were in Macon, GA (margin up from 44.7 percent in the second quarter of 2022 to 82.4 percent in the third quarter of 2022); Rockford, IL (up from 29.9 percent to 41.8 percent); Davenport, IA (up from 29.2 percent to 40 percent); Akron, OH (up from 52.8 percent to 60.3 percent) and Hilo, HI (up from 103.3 percent to 110.9 percent). The largest quarterly increases in profit margins among metro areas with a population of at least 1 million came in Milwaukee, WI (up from 51.4 percent to 54.9 percent); Miami, FL (up from 68 percent to 70.9 percent); Cincinnati, OH (up from 50.6 percent to 53.4 percent); Nashville, TN (up from 56.4 percent to 58.7 percent) and Grand Rapids, MI (up from 73 percent to 75.3 percent). Prices flat or down in half the metro areas around the U.S. Median home prices in the third quarter of 2022 decreased from the prior quarter or stayed the same in 98 (53 percent) of the 186 metro areas with enough data to analyze, although they were still up annually in 180 of those metros (97 percent). Nationally, the median price of $339,815 in the third quarter was down 2.7 percent from $349,266 in the second quarter of 2022, but still up 9.4 percent from $310,500 in the third quarter of last year. “If the Federal Reserve’s objective was to slow down the housing market, it has succeeded spectacularly,” noted Sharga. “The market has gone from double digit annual home price appreciation to below 3 percent, and declining quarter-over-quarter prices. But the impact of 6 and 7 percent mortgage rates means that many homes are still out of the reach of prospective buyers, even with prices declining slightly.” The biggest decreases in median home prices from the second to
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