Nationwide, median home prices slipped in the first quarter of 2024 and profit margins followed suit. The national median home price slid 4.3% from $435,000 to $330,000 in the quarter and the profit margin dipped from 57.1% in 4Q2023 to 55.3%.
The drop in home prices was one of the worst quarterly declines in the past decade, and this was the second consecutive quarter of lower investment returns. Even so, both prices and profit margins remained higher than they have been during most of the past decade. Indeed, the typical gross profit on typical homes sales nationwide was $120,500 in the first months of 2024, according to a new report by ATTOM.
One of every 59 single-family and condo home sales in 1Q2024 followed a foreclosure by banks and other lenders. This amounted to 1.7% of sales. Areas where Real-Estate-Owned sales accounted for the highest share of all sales in the quarter included Peoria, IL, Davenport, IA, Warner Robins, GA, Macon, GA and Baton Rouge, LA.
Cash was used to buy 41.1% of single-family homes and condos, continuing a slight upward trend. The highest proportion of cash sales – ranging from 70.1% to 61.7% — occurred in Birmingham, Claremont-Lebanon, NH, Macon, Naples, and Youngstown, OH.
“Cash-sale levels barely moved in the early months of 2024, but the portion could easily rise given the recent increase in mortgage rates,” ATTOM CEO Rob Barber said. “Higher rates mean higher costs, which provides more incentive for buyers who can afford it to forego mortgages in favor of all-cash deals.”
Institutional investors also remained active, snatching up 6.2% — or one in every 16 single-family homes and condos. The states most affected were Tennessee, Alabama, Indiana, Kansas and Oklahoma.
The slippage in home prices and profit margins raises the question of where the housing market is heading. History shows that a slump in late 2022 was followed by a spike in early 2023. Due caution is needed, according to Barber.
“Both profits and profit margins still are very high by historical measures. Amid all that, the Spring buying season will be a huge barometer for whether the market still has steam in its engine,” Barber said. Low numbers of homes for sale could push prices higher as competition intensifies, but mortgage rates above 7% and a 4% inflation rate reduce affordability.
“Typical profit margins – the percent difference between median purchase and resale prices – decreased from the fourth quarter of 2023 to the first quarter of 2024 in 89 (66 percent) of the 134 metropolitan statistical areas around the U.S. with sufficient data to analyze. They also were down annually in 71, or 53 percent, of those metros. That happened as median first-quarter home prices declined more, or went up less, compared to changes that recent sellers were seeing when they originally bought their homes. Typical profit margins increased annually in 63 of the 134 metro areas analyzed (47 percent),” ATTOM reported.
Worst affected by lower annual profit margins were Lake Havasu City, AZ, Naples, FL, Hilo, HI, Crestview-Fort Walton Beach, FL and Port St. Lucie, FL. In metros with over one million population, the hits were hardest in Honolulu, HI, Birmingham, AL, Austin, TX, San Antonio, TX, and Salt Lake City, UT.
Of the 134 metros studied, a fortunate 63 saw profit margins rise over the year. They included Peoria, IL, Scranton, PA, Oxnard, CA, Rochester, NY, and San Jose, CA. The biggest metros to see increases were San Diego, CA, Tucson, AZ, and New York, NY.
The 1Q2024 typical home price declined quarterly in 112 (84%) of the metros studied but remained 3.1% higher than the $320,000 median in 1Q2023. The worst affected were Pittsburgh, PA, Flint, MI, Memphis, TN, Birmingham, AL and Montgomery, AL. Metro areas where median home prices stayed high were Rochester, Hartford, CT, Cincinnati, OH, Providence, RI and San Jose.
ATTOM’s data show that homeowners tended to stay in their homes longer, with the longest average tenures in Barnstable, MA, New Haven, CT, Bridgeport, CT, Santa Cruz, CA and Oxnard. The fastest average turnovers were in Provo, UT, Panama City, FL, Austin, San Antonio, TX, and Chattanooga, TN.
Read More: Markets Where Single-Family Home Sales Made the Most Profit