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Profits from Home Selling Drop in 2023

Tuesday, February 20, 2024   /   by Richard Eimers

Profits from Home Selling Drop in 2023

Home Selling Drop in 2023.jpg

Attom: Home sellers made a $121K profit on the typical sale in 2023, generating a 56.5% ROI. While still near record levels, it was the 1st decline in over a decade.

IRVINE, Calif. – Home sellers made a $121,000 profit on the typical sale in 2023, generating a 56.5% return on investment, according to Attom’s Year-End 2023 U.S. Home Sales Report.

But even as both gross profits and profit margins remained near record levels, they decreased from 2022, marking the first declines in either category since 2011.

The gross profit on median-priced single-family homes sales dipped down from $122,600 in 2022 while the profit margin dropped, year over year, from 59.8%. That happened as the median nationwide home price rose at the smallest annual pace in more than a decade.

The profit fallback came during a year of ups and downs for the U.S. housing market that featured flat prices early in 2023, followed by a spike in the Spring and a drop-off in the fourth quarter. Price patterns were mixed as the upward pressure of strong employment and investment markets, along with a historically tight supply of homes, competed with the downward force of home-mortgage rates that rose during most of 2023.

“Last year certainly stood out as another very good year for home sellers across most of the United States. Typical profits of over $120,000 and margins close to 60% were still more than double where they stood just five years earlier,” said Rob Barber, CEO at ATTOM. “But the market definitely softened amid modest price gains that weren’t enough to push profits up higher after a long run of improvements.

“In 2024, the stage seems set for more small changes in prices as well as seller gains given the competing forces of interest rates that have headed back down in recent months and home supplies that remain tight, but homeownership costs that remain a serious financial burden for many households.”

Among 129 metropolitan statistical areas with a population greater than 200,000 and sufficient sales data, sellers in western and southern states again reaped the highest returns on investment in 2023. The West and South regions had 12 of the 15 metro areas with the highest ROIs on typical home sales last year, led by San Jose, CA (99.4% return on investment); Knoxville, TN (98.1%); Seattle, WA (92.9%); Spokane, WA (90.6%) and Scranton, PA (89.6%).

National median home price rises at slowest pace since 2011

The U.S. median home price increased 2.1% from 2022 to 2023, reaching another all-time annual high of $335,000. The typical 2023 price has more than double the nationwide median in 2011, a point in time right before the housing market began recovering from the aftereffects of the Great Recession that hit in the late 2000s.

The 2023 increase, however, represented the smallest annual bump during the extended boom period that began in 2012. The full-year median home-price appreciation slowed down as interest rates rose in 2023 close to 8% for a 30-year mortgage.

While gains were mostly small, median prices still rose from 2022 to 2023 in 97, or 75% of the 129 metropolitan statistical areas around the U.S. with a population of 200,000 or more and sufficient home price data last year. Those with the biggest year-over-year increases were Hilton Head, SC (median up 12.2%); Naples, FL (up 10.6%); Hartford, CT (up 10.5%); Savannah, GA (up 10.5%) and Rochester, NY (up 9.7%).

Aside from Hartford and Rochester, the largest median-price increases in metro areas with a population of at least 1 million in 2023 came in Miami, FL (up 8.6%); Cincinnati, OH (up 8.1%) and Milwaukee, WI (up 6.9%).

Metro areas where median prices dropped most in 2023 were Austin, TX (down 6.2%); San Francisco, CA (down 4.4%); Stockton, CA (down 4.4%); Boise, ID (down 4.1%) and Phoenix, AZ (down 3.8%).

Profit margins drop in two-thirds of nation, with worst declines in South or West

Profit margins on typical home sales decreased from 2022 to 2023 in 84 of the 129 metro areas with sufficient data to analyze (65%). That happened as the 2.3% jump in the median sale price nationwide in 2023 fell behind the typical 4.4% increase recent sellers had been paying when they originally bought their homes.

The 40 largest decreases in investment returns were all in the South or West, led by Port St. Lucie, FL (ROI down from 104.5 in 2022 to 82.7% in 2023); Austin, TX (down from 67.2% to 46.2%); Phoenix, AZ (down from 79.3% to 60.6%); Reno, NV (down from 80.6% to 64.5%) and Salt Lake City, UT (down from 68.3% of 52.2%).

Aside from Austin, Phoenix and Salt Lake City, the largest ROI losses from 2022 to 2023 in metro areas with a population of at least 1 million were in San Francisco, CA (ROI down from 92.7% to 79.5%) and Las Vegas, NV (down from 74.3% to 61.8%).

The biggest increases in investment returns from 2022 to 2023 came in Scranton, PA (ROI up from 75.1% to 89.6%); South Bend, IN (up from 53.6% to 66.5%); Hartford, CT (up from 53.2% to 65.8%); Rockford, IL (up from 48.8% to 57.8%) and Rochester, NY (up from 53.8% to 62.8%).

Aside from Hartford and Rochester, metro areas with a population of at least 1 million and increasing profit margins in 2023 included Cincinnati, OH (up from 54.8% to 61.2%); Cleveland, OH (up from 48% to 53.4%) and Milwaukee, WI (up from 52.9% to 57.2%).

Homeownership tenure up to two-year high

Homeowners in the U.S. who sold in the fourth quarter of 2023 had owned their homes an average of 7.96 years, up from 7.8 years in the third quarter and from 7.67 years in the fourth quarter of 2022. The latest figure represented the high point since the third quarter of 2021. Average seller tenures were up, year over year, in 80, or 71%, of the 113 metro areas with a population of at least 200,000 and sufficient data to analyze.

The biggest increases in average seller tenure from the fourth quarter of 2022 to the fourth quarter of 2023 were in Chico, CA (up 20.9%); Modesto, CA (up 12.7%); Clearlake, CA (up 11.9%); Madera, CA (up 11.2%) and Tucson, AZ (up 10.5%).

The longest tenures for home sellers in the fourth quarter of 2023 were in Barnstable, MA (14.18 years); Santa Cruz, CA (13.2 years); Bridgeport, CT (13.14 years); New Haven, CT (13.08 years) and Worcester, MA (12.57 years).

Cash sales at high point since 2014

Nationwide, all-cash purchases accounted for 38%, or about one of every three single-family home and condo sales in 2023 – the highest level since 2014. The latest portion was up from 36.1% in 2022, although still off from the 44.7% peak this century in 2011.

Among 186 metropolitan statistical areas with a population of at least 200,000 and sufficient cash-sales data, those where cash sales represented the largest share of all transactions in 2023 included Macon, GA (61.5% of sales); Naples, FL (58.9%); Myrtle Beach, SC (56.3%); Youngstown, OH (55.1%) and Salisbury, MD (54.4%).

Source: Florida Realtors

  beach road realty, richard eimers, eimers group

Beach Road Realty
Richard Eimers
17 Roundwood Drive
Inlet Beach, FL
Beach Road Realty

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