Selling in a Shifting Market: Key Insights for Homeowners

For the third quarter of 2024, typical profit margins for U.S. home sellers stand at 55.6%, slightly down from both the previous quarter and the same period last year. Although this may seem concerning, these returns are still far above historical norms. The dip in profit margins aligns with a broader leveling off in home prices, which has impacted sellers nationwide.

As a broker, I advise focusing on the fact that these profits are still substantial by historical standards. The peak seller's market of recent years has softened, but sellers can still realize strong gains by understanding local trends and timing.

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The Reality of Price Trends: Flattening Out

The average U.S. home price stalled at around $360,000 this past summer, remaining virtually unchanged from the previous quarter. After a steep rise earlier in the year, prices are now stabilizing, affecting sellers’ profit margins slightly.

However, this price leveling presents a favorable moment for sellers to recalibrate expectations. Instead of waiting for another price surge, sellers may want to focus on market timing, as holding out for an optimal season or investing in small home improvements can still impact final profits.

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Regional Insights: Where Margins Are Up and Down

Half of U.S. metro areas saw profit margins dip from the second to third quarter of 2024, with the most significant drops in pricier metros like San Francisco, CA, and Austin, TX. However, some markets defied the trend. In Trenton, NJ, Albany, NY, and Rochester, NY, for example, profit margins have shown robust year-over-year increases.

If you're a seller in areas where profits are trending down, consider listing sooner rather than later to avoid further declines. On the other hand, those in growing markets may have the opportunity to hold off for even better returns.

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Nationwide Raw Profits Remain High, Though Margins Are Shifting

Raw profits—total dollar gains on home sales—have held steady, nearing record highs of approximately $130,000. While 47% of metro areas saw flat or slightly reduced profits, many markets, especially in the Midwest and Northeast, continue to experience gains. For example, Rochester, NY, and Cleveland, OH, recorded the highest increases in raw profits in larger metros, proving that price dynamics vary significantly depending on the region.

For sellers looking to maximize profits, these raw figures underscore the importance of market timing. Real estate is local; understanding regional and even neighborhood-level price trends can help sellers maximize their take-home earnings.

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Market Stability is Key for Informed Decisions

The market’s gradual decline in profit margins does not signal a complete downturn but rather a stabilization phase. Many large markets continue to see investment returns exceeding 50%, far above levels seen five years ago. Coastal markets such as San Jose, CA, Seattle, WA, and Miami, FL, still lead in returns, showing that demand remains robust, even if less frenzied.

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Practical Advice for Sellers in a Shifting Market

1. Know Your Local Market: Trends vary across cities and regions. Working with a broker who understands your area’s unique price dynamics can help you position your home competitively.
2. Focus on Timing: While spring often brings the highest demand, third-quarter data suggests this is not a guaranteed profit-maximizing season anymore. List your home when local demand peaks, rather than waiting for broad seasonal cycles.
3. Consider Buyer Affordability: As affordability becomes a challenge, setting a competitive price can improve your odds of a quick sale, especially in markets with high price sensitivity.
4. Invest Wisely in Home Improvements: Small improvements that boost curb appeal or address critical repairs can increase buyer interest and may offset small dips in profit margins.

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Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.