Homeowners are seeing smaller profits from sales compared to a year ago, but the latest numbers still surpass pre-pandemic levels, as growing numbers hold onto their properties amid surging equity accrual.
Sellers gained an average of 49.9% in profit after transactions closed during the third quarter, according to the latest home sales report from real estate analytics provider Attom. While the margin grew from 49.3% three months earlier, profits shrunk from 55.4% one year prior. Profit margins are calculated as the percent difference between median purchase and resale prices.
In raw number terms, the typical profit amounted to $123,100, a 1.9% increase from the previous quarter, but 3.5% lower from 12 months ago.
Despite the year-over-year drop
"Profit margins remained steady and high throughout the traditionally busier summer selling season," Attom CEO Rob Barber said in a press release.
"While continuously rising prices could have chased away buyers and slackened demand, the
Although profits were up on a quarterly basis, margins decreased in a majority of the metropolitan areas tracked by Attom, indicating wide regional variations in today's housing market. Sales in large urban areas resulted in 18 times greater gains than those at the lower end.
The city with the highest profit margin was San Jose, California at 94.3%. Seattle and Buffalo, New York, followed at 80.2% and 80%, respectively.
Ninety-two of 157 markets saw slimmer margins from the prior quarter, though, with Tampa, Florida; Seattle and Fresno, California seeing the largest pullbacks.
Major California cities dominated the list of top gainers on a per-dollar basis, with sellers in San Jose seeing $740,500 in profit from a single transaction, followed by San Francisco and San Diego at $450,000 and $350,000.
The median home sales price also came in at $370,000, hitting a new high for the second-straight quarter and increasing close to 3% from a year ago. Although profit margins may have fallen, home prices still rose in 55.3% of markets quarter over quarter and in 76.7% compared to a year ago.
The lock-in effect on profits and home prices
Limited inventory is playing a large role in driving prices — and profit margins — up with the data pointing to some of the leading factors behind sluggish growth.
Homeowners who sold their properties in the third quarter had held them for an average of 8.39 years, the longest length of time in at least 25 years. Average home tenure grew from the second quarter's 8.13% and increased from 8.02% on a year-over-year basis.
How all-cash and institutional sales performed
Elsewhere, Attom found all-cash sales made up 38.9% of home sales last quarter, rising from 38% three months earlier and 37.6% a year ago.
Purchases made by institutional investors decreased to a 6.4% share compared to 7% in the second quarter, but sales were up from 6.1% a year ago. States with the largest percentage of institutional buyers were Texas and Missouri, both at 8.8%, followed by Tennessee with 8.7%.
