The latest profit margins on median-priced single-family sales dipped to 47.2% in Q1 2022.
Sell Profits Contract in Q1 2022
For the first time since late 2019, quarterly seller profit margins on median-priced single-family homes declined from 51.6% to 47.2% in Q1 2022, according to the Q1 2022 US Home Sales Report from ATTOM.
Though seller profit margins often dip during the winter months, this latest Q1 2022 of -4% is the largest decline in seller profits since Q1 2011.
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That said, ATTOM’s Q1 2022 US Home Sales Report indicates that the typical return on investment (ROI) remained historically high. This latest Q1 2022 profit margin of 47.2% was nearly +10% points higher than the 37.5% level recorded in Q1 2021 and almost +20% above the average profit margin of 29.4% recorded in Q1 2019.
Gross Profits Also Near Record Highs
The typical single-family home sale nationwide accounted for a gross profit of $103,000 during Q1 2022. That gross profit was down from Q4 2021’s gross profit of $107,187 BUT noticeably above gross profit of $75,001 the year before.
“Home prices simply can’t continue to go up as rapidly as they have for the past few years,” said Rick Sharga, ATTOM’s executive vice president of market intelligence. “The combination of higher prices, rising mortgage rates, and the highest rates of inflation in 40 years may be pricing some prospective buyers out of the market, which means we may begin to see lower sales numbers. Ultimately, as affordability worsens, price appreciation should slow down, and we may even see modest price corrections in some markets.”
Profit Margins Down in 42% of Metro Areas
Profit margins declined in 71 or the 170 metros ATTOM analyzed for its latest Q1 2022 US Home Sales Report. despite the fact that investment returns were up annually in 152 (89%) of those metro areas.
The metros experiencing the largest quarterly decreases in profit margins included:
- Santa Barbara CA – from 72.9% to 45.8% in Q1 2022
- Boise ID – from 110.4% to 88.8%
- Brownsville TX – from 54.3% to 38.1%
- Louis MO – from 37.6% to 23.9%
- Des Moines IO – from 48.1% to 35.2%
In metro areas with populations of at least 1M, the largest quarterly profit margin decreases were in the following metros:
- Louis MO – from 37.6% to 23.9%
- Raleigh NC – from 53.1% to 40.7%
- Sacramento CA – from 63.9% to 52.1%
- Minneapolis MN – from 40% to 32%
- Atlanta GA – from 38.5% to 31%
Metros with Lowest Profit Margins in Q1 2022
- Lafayette LA – 16.6%
- Shreveport LA – 17.1%
- Columbus GA – 19.2%
- Little Rock – AR – 21.3%
- Lakeland FL – 22.9%
Profit Margins Increased in 58% of Metro Areas in Q1 2022
Of the 58% metro areas with quarterly increases in profit margins during Q1 2022. according to ATTOM, these metro areas had the largest profit margin increases:
- Kingston TN – up 71.1% from 51.1%
- Rochester NY – up 76.3% from 57.1%
- Lake Havesu AZ – up 75.2% from 58.2%
- Cape Coral-Fort Myers FL – up 80.9% from 64.2%
- Toledo OH – up 53.3% from 39.8%
- Honolulu Hi – up 47.6% from 34.8%
- Richmond VA – up 60% from 48.2%
- Oklahoma City OK – up 38.6% from 30%
- New Orleans LA – up 34.4% from 27.6%
Metros with Highest Profit Margins in Q1 2022
- Hilo HI – 96.4%
- Scranton PA – 91.2%
- Boise ID – 88.8%
- San Jose CA – 86.1%
- Spokane WA – 85%
Additional Noticeable Data Points from ATTOM in Q1 2022
- Homeownership tenure dropped to 5.72 years, an 11-year low
- Cash sales accounted for 34.2% of all single-family home sales in Q1 2022, the highest level since Q1 2015
- Institutional investment dropped to 4.1% of all single-family purchases – less than 50% of the 9.1% level in Q4 2021
Important comment concerning institutional investing – “For those people who still believe the theory that institutional investors are buying up all the available inventory, the numbers in our Q1 2022 report offer a pretty strong rebuttal,” said Sharga. “It’s also interesting that cash sales – often attributed to institutional investors – continued to increase even as investor activity diminished.”
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Thanks to ATTOM.
