Profits on home sales took a dip in 2023
Sellers are still seeing near-record-high profits, but this was the first year-over-year decline in 12 years.
Key points:
- While down slightly from 2022, the $121,000 gross profit on a typical home was more than double what it was just five years ago.
- Profit margins were also near record highs, according to a year-end report from ATTOM.
- The report also noted that the average homeowner tenure was nearly eight years, among the highest levels seen in two decades.
While still at near-record levels, profits on U.S. home sales declined for the first time since 2011.
The year-end report from real estate data firm ATTOM estimates home sellers averaged $121,000 in gross profit in 2023. That's a big number — but it represents a small decline following a record-setting year. In 2022, a typical sale generated $122,600 in profit for a median-priced home.
It's still quite a time to be a home seller. ATTOM CEO Rob Barber noted that today's sellers are earning more than double the profit compared to five years ago: In 2018, gross profit was just under $50,000.
Profit margins, which were at 56.5% in 2023, were also near record highs.
"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 said.
Barber believes the stage is set for modest changes in price and seller gains in 2024 given the competing forces of elevated interest rates and tight inventory.
Home price growth slowed, but ownership tenure is up
According to ATTOM's report, which looked at recorded sales, foreclosure filings and loan data, the U.S. median home price increased 2.1% between 2022 and 2023 — which was the slowest rise since 2011. Even so, the median home price hit another record high, coming in at $335,000.
Despite the possibility of substantial profits, homeowners are staying in their homes longer. Those who sold their home in the fourth quarter of 2023 had owned it for 7.96 years on average, up from 7.67 years in the fourth quarter of 2022.
The latest tenure figure is near the record set in 2021 and well above the average tenure throughout the 2000s, when owners typically stayed in their homes for only about 3.5 to 4.5 years.
More buyers used cash
All-cash purchases accounted for 38% of U.S. home purchases last year, the highest share since 2014. Elevated — and unpredictable — mortgage rates played a key role in this, as many buyers who needed financing decided to delay their purchase, especially as rates neared 8% in the fall.