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Declining Profit Margins in Home Sales: Q1 2025 Analysis

As reported in the latest U.S. Home Sales Report from ATTOM, a renowned provider of property data, the profit margins associated with home sales have taken a downturn in the first quarter of 2025. The typical profit margin fell to 50.2%, a noticeable drop from the 64% peak observed in 2022. This reduction of 3.2 percentage points from the previous quarter and 4.8 percentage points from the same period last year is indicative of evolving market conditions.

Despite the decline, it is crucial to recognize that profit margins remain significantly higher than pre-pandemic levels. The national average sale price of homes stabilized around $355,000—a slight decrease from its all-time high of $358,000 recorded in 2024—contributing to a median raw profit of $119,000 for sellers. This demonstrates that while profits may be weakening, they are still substantial by historical standards.

Rob Barber, CEO of ATTOM, commented on these trends, noting that sellers today may feel less affluent than in previous years. Yet, he reassures them that profits are still robust both in terms of percentages and absolute dollar amounts. Looking ahead, Barber expects an uptick in profits as the traditionally strong summer selling season approaches, which typically invigorates the market after a generally weaker first quarter.

Trends Across Metropolitan Areas

The report highlights that profit margins have diminished in 77% of the 128 metropolitan statistical areas evaluated, where a minimum of 1,000 home sales took place. Florida and California seem especially affected, with declines measured across a range of cities. For instance:

• - In Punta Gorda, FL, profit margins plummeted from 106.3% to 69.2%.
• - Ocala, FL also saw a decline from 99.9% to 66.7%.
• - In Bakersfield, CA, margins decreased from 81.1% to 58.9%.

In terms of year-over-year comparisons, notable gains in profit margins were noted in cities like Toledo, OH, and Birmingham, AL, where margins increased significantly, from 27.8% to 44.7% and from 24.9% to 35.1%, respectively.

Among metropolitan areas with populations exceeding 1 million, declines were stark in cities such as San Jose, CA where margins dipped from 105% to 88.8%, and Tampa, FL from 73.9% to 59.1%. Meanwhile, Chicago, IL experienced an increase from 41.9% to 45.2%.

High Returns Despite Margin Drop

Interestingly, nearly 60% of the cities analyzed still reported profit margins at or above 50%. In larger metro areas, top performers included San Jose, CA (88.8%), Buffalo, NY (82.2%), and Seattle, WA (75.3%). However, cities like New Orleans, LA and Dallas, TX lingered at the bottom of the scale, with margins below 30%.

Overall, while the average profit gain remained stable at approximately $119,000, significant variances in metro areas were apparent. Sales in San Jose, CA yielded the highest raw profits at $710,000, while New Orleans, LA saw much lower figures, around $38,000.

Trends in Homeownership Tenure and Economic Factors

An additional trend signaling shifts in the market is the increasing average duration homeowners are retaining their properties. As of Q1 2025, the average tenure before selling was 8.12 years, nearly an increase of six months compared to the previous year. This reflects a common strategy where homeowners are opting to hold on longer before making the leap into the market's unpredictable terrain.

With an uptick in cash transactions hitting 42%, the highest since 2014, and institutional sales also rising to approximately 6.3%, these elements collectively paint a complex picture of an evolving housing market. Such trends emphasize the necessity for sellers and buyers alike to adapt their strategies in response to these shifting economic landscapes.