BAM Key Details:
- ATTOM released its Q1 2023 U.S. Home Sales Report, which shows seller profit margins on single-family home and condo sales across the country fell to 44.2% as home prices remained flat in three quarters of the U.S.
- The typical ROI nationwide remained high in Q1, nearly double its value from four years ago, but the margin is down by 12 points from the peak of 56.1% in Q2 2022.
Home sellers in the U.S. are seeing a decline in profits, according to the Q1 2023 U.S. Home Sales Report just released by ATTOM. Profit margins on median-priced single-family home and condo sales shrank to 44.2% from the typical Q4 2022 margin of 48.7%.
That new figure marks the third consecutive quarterly decline nationwide—and the lowest return since mid-2021. Meanwhile, as the national median home price rose 1% from the previous quarter (to $321,135), home prices have held steady or declined in nearly three quarters of major housing markets across the U.S.
The typical seller ROI remained high in Q1, nearly double its value from four years prior, but has dropped 12 points from the peak of 56.1% reached in Q2 2022.
Homeowners are starting to take a significant hit in the form of lost profits from the recent market slowdown. Nine months of varying price declines around the country have carved away almost a quarter of the profit margin sellers were enjoying in early 2022. That’s a striking reversal of what we saw for a decade. It is possible that the upcoming peak buying season of 2023 could lead to increased profits, owing to favorable mortgage rates and other factors. Over the next few months, we can expect to gain more clarity regarding whether the current market stagnation is a short-term aberration or a more significant trend.
Profit margins remain flat or decline in two-thirds of U.S. markets
After a decade of continuous gains, this latest round of declining profits and home prices across the country reflects a housing market more or less stalled since the middle of 2022.
That’s when the national median home price dropped 7% from the record high in Q2, taking profit margins down with it. Behind that price drop were the spike in mortgage rates to over 6%, inflation that rose to 40-year highs, and a stock market that slumped after reaching all-time records.
All these cut into what prospective buyers could afford, cooling demand and lowering prices despite low inventory.
Given that, as we enter the spring home buying season of 2023, the forecast for the housing market remains cloudy. Inflation has cooled, and mortgage rates have fallen from last year’s high of around 7% to the mid-6s. Predictions among economists point to more interest rate hikes and a possible (mild) recession.
The top five metros with the biggest quarterly profit margin declines:
- Akron, OH (down from 66.7% in Q4 2022 to 47.8% in Q1 2023)
- Stockton, CA (down from 76.7% to 59.4%)
- Louisville, KY (down from 48.6% to 32%)
- Prescott, AZ (down from 73.3% to 58.1%)
- Buffalo, NY (down from 66.2% to 51.5%)
Aside from Louisville and Buffalo, the top five metros with populations of at least one million that experienced the biggest quarterly declines in profit margins included—
- St. Louis, MO (down from 33.7% to 23.6%)
- San Francisco, CA (down from 58.9% to 49.1%)
- Salt Lake City, UT (down from 53.6% to 44.5%)
Profit margins increased in 44 of the 137 metros in ATTOM’s analysis (32%). The top five metros with the biggest profit margin increases were—
- Trenton, NJ (up from 43.6% in the Q4 2022 to 78.6% in Q1 2023)
- Scranton, PA (up from 63.3% to 87.5%)
- Lake Havasu City, AZ (up from 63.6% to 82.8%)
- Atlantic City, NJ (up from 33.2% to 48.5%)
- Reading, PA (up from 53.9% to 68.8%)
The top five metros with populations of at least one million that saw the biggest profit margin increases:
- Pittsburgh, PA (up from 47.8% to 53.1%)
- Memphis, TN (up from 46.3% to 51.1%)
- Richmond, VA (up from 52.1% to 55.6%)
- Indianapolis, IN (up from 46.7% to 50%)
- Grand Rapids, MI (up from 64.4% to 67.1%)
Raw profits and median home prices remain flat or fall in three-quarters of the U.S.
Profits from median-priced home sales, measured in raw U.S. dollars, remained the same or decreased from Q4 2022 to Q1 2023 in 100 (73%) of the 137 metros analyzed.
The top five metros with populations of at least one million that experienced the biggest quarterly declines in raw profits were—
- St. Louis, MO (down 30%)
- Louisville, KY (down 29%)
- Birmingham, AL (down 28%)
- New Orleans, LA (down 24%)
- Buffalo, NY (down 22%)
The top five metros with the largest raw profits on median-priced home sales in Q1 2023:
- San Jose, CA (profit of $475,000)
- San Francisco, CA ($316,000)
- Naples, FL ($255,750)
- San Diego, CA ($242,750)
- Seattle, WA ($236,000)
Median home prices for Q1 2023 held steady or saw a quarterly decline in 104 or 75% of the 139 metros with sufficient data. That said, prices were still up annually in 102 (73%) of those metros. Nationally, the median Q1 price rose 1%, from $318,000 in Q4 2022 to $321,135, and 1.6% annually from $316,000 in Q1 2022.
Here are the top five metros with the biggest quarterly declines in median home prices from Q4 2022 to Q1 2023:
- Toledo, OH (down 13.7%)
- Trenton, NJ (down 13.3%)
- Pittsburgh, PA (down 11.1%)
- Detroit, MI (down 9.5%)
- San Francisco, CA (down 8.8%.
Aside from Pittsburgh, Detroit, and San Francisco, the top five metros with populations of one million or more that saw the biggest declines in median home prices in Q1 2023 include Buffalo, NY (down 8.7%) and Baltimore, MD (down 7.3%)
Home prices reached new highs during Q1 2023 in only six of the 139 metros with sufficient data. The top five metros with the biggest quarterly increases in median prices from Q4 2022 to Q1 2023 were—
- Ogden, UT (up 7.2%)
- Naples, FL (up 6%)
- Savannah, GA (up 5.8%)
- Fort Myers, FL (up 5%)
- Crestview-Fort Walton Beach, FL (up 4.9%)
The top five metros with populations of at least one million that saw the biggest quarterly increases in median home prices during Q1 2023:
- Virginia Beach, VA (up 2.3%)
- San Diego, CA (up 1.6%)
- Miami, FL (up 1.2%)
- Riverside, CA (up 1%)
- Richmond, VA (up 0.6%)
Homeownership tenure falls to 12-year low
Homeowner tenure hit an average of 5.59 years in Q1 2023, falling from 5.81 years in Q4 2022 and 5.68 years in Q1 2022, reaching its lowest point since mid-2011.
Average homeowner tenure dropped year over year from Q1 2022 in 56% of the metros with sufficient data. The top five metros with the biggest declines were—
- Atlantic City, NJ (tenure down 27%)
- Dayton, OH (down 19%)
- Tallahassee, FL (down 16%)
- Chattanooga, TN (down 15%)
- St. Louis, MO (down 14%)
Sellers in the Northeast and West regions had 14 of the 15 longest average tenures in Q1 2023. The top five metros with the longest tenures in these regions were—
- Honolulu, HI (8.21 years)
- Manchester, NH (8.17 years)
- Kahului-Wailuku, HI (7.93 years)
- Bellingham, WA (7.87 years)
- New Haven, CT (7.29 years)
The top five metros with the smallest average tenures for sellers in Q1 2023 were—
- Lakeland, FL (1.22 years)
- Memphis, TN (2.92 years)
- Cleveland, OH (3.83 years)
- Tucson, AZ (3.95 years)
- Salem, OR (4.08 years)
ATTOM’s numbers for homeownership tenure are based on recorded sales deeds, foreclosure filings, and loan data, which would naturally focus on homes being sold and changing ownership, not so much on homeowners who’ve remained at the same address for 30-plus years.
Redfin’s data, for the sake of context, is based on their analysis of U.S. Census Bureau’s one-year American Community Survey of all homeowners (or all those who responded to the survey) conducted in 2021.
Lender owned foreclosures creep upward but remain low
One of every 59—or 1.7%—of single-family home and condo sales in Q1 2023 followed a foreclosure by a bank or other lender. That’s up from 1.3% in Q4 2022 and from 1.2% in Q1 2022. But it’s still a tiny fraction of the 2009 peak of 30% reached in the aftermath of the Great Recession of 2007.
Among metros with sufficient data, those with the highest rates of REO sales in Q1 2023 were—
- Peoria, IL (13.6%—or one in seven sales)
- Flint, MI (11.9%)
- Lansing, MI (7.3%)
- St. Louis, MO (7.2%)
- Kalamazoo, MI (6.6%)
All-cash sales reach 10-year high
The national rate of all-cash purchases as a share of total single-family home and condo-sales reached 39.3% in Q1 2023, the highest since Q1 2013. That figure is up from 37.9% in Q4 2022 and from 36.9% in Q1 2022.
Among metros with sufficient data, the top five with the highest rates of all-cash purchases in Q1 2023 were—
- Amsterdam, NY (75.9% of all sales)
- Claremont-Lebanon, NH (69.9%)
- Seneca, SC (69.3%)
- Hudson, NY (68.1%)
- Palatka, FL (65.2%)
The top five metros with the lowest rates of all-cash purchases were—
- Vallejo, CA (21.4%)
- Seattle, WA (22.5%)
- Spokane, WA (22.6%)
- Washington, DC (22.6%)
- Kennewick, WA (22.9%)
Institutional investment rate declines
Nationwide, institutional investors accounted for 5.4% of single-family and condo purchases in Q1 2023 (one of every 19). That’s down from 6.6% in Q4 2022 and from 6.1% in Q1 2022.
Top five states with the largest percentage of sales to institutional investors in Q1 2023:
- Georgia (8.4% of all home sales)
- Tennessee (7.7%)
- Alabama (7.5%)
- Texas (7.5%)
- Arizona (7.3%)
Top five states with the lowest percentage of sales to institutional investors in Q1 2023:
- Massachusetts (2.6% of all sales)
- Wisconsin (3%)
- Louisiana (3.2%)
- New York (3.3%)
- Delaware (3.6%)
FHA-financed purchases: unchanged from Q4 2022 and up from a year ago
Home buyers using Federal Housing Administration (FHA) loans accounted for 8.3% of single-family and condo purchases nationwide in Q1 2023 (one of every 12). That figure is unchanged from the previous quarter (Q4 2022) and up from 7.3% in Q1 2022.
Among metros with sufficient data, the top five with the highest rates of home sales attributed to FHA buyers in Q1 2023 were—
- Bakersfield, CA (21% of all sales)
- Lakeland, FL (20.1%)
- Dover, DE (19%)
- Pueblo, CO (18.5%)
- Modesto, CA (18.1%)
Read the full report for more information, including report methodology.
Top takeaways for real estate agents
As a real estate professional, you need to know what’s going on in your local market and be able to articulate it clearly to your clients and community to help them make the right decisions for themselves. Don’t allow misleading headlines to cheat prospective buyers in your community of the chance to become homeowners if they’re ready, willing, and able to make that choice.
Be the agent who clears the fog and helps them find a home that meets their needs, even if its location is one they hadn’t considered before.