According to new data from Attom, the profit margin on median-priced single-family home and condo sales retreated to 55.3% during the first quarter, lowest in more than two years.
The data and analytics company’s Q1 2024 U.S. Home Sales Report found that the typical profit margin dropped from 57.1% in the fourth quarter and from 56.5% in the first quarter of 2023.
Part of the decline can be attributed to seasonality; property prices often fall during the winter, when there’s less home selling activity. Things were no different in the past few months, with the median national home price, according to Attom’s records, down from $345,000 in the fourth quarter of 2023 to $330,000 during the opening quarter this year.
That 4.3% quarterly pullback, however, marked one of the largest quarter-over-quarter drops in the last decade. With median first-quarter home prices declining more (or growing less) compared to when many recent home sellers originally brought their homes, several saw the shift translate into lower profit margins.
“The latest price and profit numbers show notably downward trends, which raises new questions about whether the housing-market boom is indeed ebbing, or even ending, after so many years of improvement,” said Rob Barber, CEO at Attom.
“But due caution is needed in looking at the first-quarter data and what the patterns mean,” he added. “We saw a similar downward pattern from late 2022 into early 2023, and then the market surged. Plus, profits and profit margins still are very high by historical measures.”
Indeed, while profit margins are down, they remain handily above pre-pandemic levels. Sellers realized a 12% return on investment in 2015; in 2019, that figure was at 31%. Even during the boom years of 2020 and 2021, sellers were averaging between 36% and 50% in profit margin on home sales.
Similarly, while the typical gross profit of $120,500 realized in first-quarter home sales is down from the typical profit of $121,000 realized last year, it’s still easily above historical norms.
The coming months will serve as an interesting watchpoint for the market, with supply still historically short, affordability still historically low and demand pent up.
“The spring buying season will be a huge barometer for whether the market still has steam in its engine,” Barber said.
