Market Twist: Home Sellers' Profits Dip Amid Modest Price Increases

For the first time in more than a decade, home sellers' profits dropped even as prices saw a modest uptick.

The gross profit on a median-priced single-family home dropped from $122,600 in 2022 to $121,000 last year, according to real estate data provider ATTOM's Year-End 2023 Home Sales Report. The profit margin dropped year over year from 59.8% to 56.5 during the same period. That occurred as the median nationwide home price rose at the lowest annual pace in more than a decade.

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 doubled the nationwide median from 2011 — just before the housing market began recovering from the Great Recession.

But it was the smallest annual increase in prices during the extended boom period that started in 2012. Median home price appreciation slowed as interest rates rose to nearly 8% for a 30-year mortgage last year.

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The dip in profits happened during a year the U.S. housing market experienced ups and downs, including flat prices in early 2023 followed by a spike in the spring and a drop-off in the fourth quarter. Strong employment and investment markets coupled with a historically tight supply of homes resulted in mixed price patterns.

"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," ATTOM CEO Rob Barber said. "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 home ownership costs that remain a serious financial burden for many households."

Western and Southern states saw the highest returns on investment in 2023. San Jose, California, led the group with a 99.4% return on investment, followed by Knoxville, Tennessee, at 98.1%; Seattle at 92.9%; Spokane, Washington, at 90.6% and Scranton, Pennsylvania at 89.6%.

Nationwide, all-cash purchases accounted for 38% of all single-family home and condo sales last year — the highest level since 2014 and up from 36.1% in 2022, although still off from 44.7% in 2011.

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Cash sales represented the largest share of transactions in Macon, Georgia, at 61.5%; Naples, Florida, at 58.9%; Myrtle Beach, South Carolina, at 56.3%; Youngstown, Ohio, at 55.1%; and Salisbury, Maryland, at 54.4%.

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