Profit Margins on Home Sales Decreased in 2023 But Remained Near All-Time Highs

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While both gross profits and profit margins on home sales remained near record levels in 2023, they decreased from 2022, marking the first declines in either category since 2011, according to ATTOM.

According to the firm’s Year-End 2023 U.S. Home Sales Report, home sellers made a $121,000 profit on a typical sale in 2023, generating a 56.5% return on investment.

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, ATTOM says in the report. 

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,” says Rob Barber, CEO at ATTOM. “Typical profits of over $120,000 and margins close to 60 percent were still more than double where they stood just five years earlier.

“But the market definitely softened amid modest price gains that weren’t enough to push profits up higher after a long run of improvements,” Barber says. “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 home ownership 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, Tenn. (98.1%); Seattle, Wash. (92.9%); Spokane, Wash. (90.6%) and Scranton, Pa. (89.6%).

Photo: Alexander Grey

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