The Federal Reserve just announced another rate hike of 75 basis points this week in an effort to control sky-high inflation. Needless to say, this is having dramatic effects on the housing market as well. In fact, this is being demonstrated in home sale profit margins across the country. By definition, seller profit margins are the change between median purchase and resale prices. According to the ATTOM Data Solutions third-quarter 2022 U.S. Home Sales Report, profit margins on median-priced single-family home and condo sales across the United States decreased to 54.6% as home prices declined for the first time in almost three years. This drop came in slightly lower than what was reported for the second-quarter 2022, which came in at 57.6%.
Needless to say, rapidly rising mortgage interest rates are not only impacting the number of home buyers in the market thus resulting in fewer home sales, but they are also impacting home prices as well.
Key takeaways from the data
- Cash sales remain near an 8-year high at 35.7% of all single-family home and condo sales in Q3 2022.
- Institutional investors nationwide accounted for one of every 15 single-family home purchases (6.7% of all single-family home purchases) in Q3 2022.
- Lender-owned foreclosures remain at a 100-year low point and represented just 1% of all U.S. single-family home and condo sales in Q3 2022. This figure is tied for the lowest portion since at least 2000.
- In an analysis of 186 metro markets, median home prices in the Q3 2022 decreased quarter-to-quarter or stayed the same in 98 markets. With this said, median home prices were still up year-over-year for 180 of these markets.
Having come off an unprecedented run in the housing market over the past few years, it is not entirely surprising to see home profit margins retract some. Of course, much of this is the result of the Federal Reserve’s aggressive efforts with increasing interest rates in order to combat record inflation. Looking forward, it is largely expected that the Federal Reserve will continue this aggressive approach with interest rates. Ultimately, we should see these continued effects in the housing market for some time to come. Of course, there are always opportunities in any market. Fortunately, South Florida will continue to be one of the most desirable locations in the country. Are you looking to buy or sell real estate in South Florida? We can help. Contact the Live South Florida Realty, Inc. team today! In addition, don’t forget to download the Florida Home Search app today!