Home prices continue to rise, but the rate at which they're doing so is slowing rapidly, according to a new report from ATTOM Data Solutions. As a result, sellers' potential profits are being impacted.
Profit margins on median-priced single-family homes dropped to 47.2%, down from 51.6% in the fourth quarter of 2021, according to the company's 2022 U.S. Home Sales Report for Q1. It marked the first quarterly decline since 2019 and the largest decline in a decade.
In terms of gross profits, the typical single-family home in the U.S. brought in a profit of $103,000 in the first quarter. This is down from the average profit of $107,187 in the fourth quarter last year, but still well above the average $75,001 in profits in the first quarter of 2021.
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Home prices still hit new all-time high
Home prices rose by 1.7% in the first quarter of 2022, from $315,000 in Q4 2021 to an all-new high of $320,500. This marked the ninth straight quarter of increases, ATTOM said, and rose by 16.5% compared with the first quarter of last year.
Even though median home prices are rising, home buyers are waiting less to find their next home. Homeowners who sold their homes in the first quarter of 2022 had lived there an average of 5.72 years, according to ATTOM's data. This is down from 6.12 years in the fourth quarter and from 6.82 years in the first quarter of 2021.
"Home prices simply can’t continue to go up as rapidly as they have for the past few years," said Rick Sharga, executive vice president of market intelligence for ATTOM.
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Some markets could see modest price corrections
Although home prices are currently rising, worsening affordability could soon cause the price growth to slow in some housing markets. In fact, Sharga said borrowers could begin to see modest home value corrections in the coming months.
"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," he said. "Ultimately, as affordability worsens, price appreciation should slow down, and we may even see modest price corrections in some markets."
Some metros are already experiencing home price declines. The largest quarterly decreases were seen in Macon, Georgia, which dropped 15.4%. In Kalamazoo, Michigan, prices dropped 10.9% and in Detroit, prices fell 10%.
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