Blame declining home prices and rising mortgage rates
California home sellers endured another difficult quarter, as profits declined – in some metros by double digits – amid a drop in prices.
But all eight major metros, from the Bay Area and the Sacramento region to San Diego, had better profits and profit margins than the national average during the first quarter, according to ATTOM Data.
Bay Area sellers enjoyed the biggest profit gains — $652,500 in San Jose and $375,000 in San Francisco. But even those head-turning paydays were off 7.8% and 16.3%, respectively, compared to a year ago (see table below).
The Sacramento region, one of the hottest housing markets in the nation just a few years ago, has hit tough times. Capital region sellers had a profit of $171,000 and a profit margin of 45%, barely above the national average and the lowest in California.
The remaining metro regions were in the 50% range for profit margins, much lower than the mid-70% return on investment just two years ago, according to ATTOM Data.
California’s eight metro regions had an average drop in profit margins of 8.4%.
Home sellers, from California to Maine, should temper their expectations with profits, which are returning more to the historic norm after several years of staggering gains, said ATTOM CEO Rob Barber.
“The profit margins sellers enjoyed over the last few years, which were consistently over 50%, were unusual,” he said. “But even with the most recent dip, margins are still well above the 30% return on investment sellers were seeing before the pandemic.”
Higher mortgage rates, lower prices
Blame declining prices for the drop in profits, and higher mortgage rates for shrinking the number of potential buyers.
Six of the eight metros in the state experienced a drop in prices, including a rather significant 7% in San Francisco and 5% in Sacramento during the first quarter compared to a year ago.
“The first quarter is typically a slower sales season and that was compounded this year by rising mortgage rates,” Barber said. “After the record-high home prices we saw last summer, prices appear to be leveling out.”
Nationwide, the average profit margin was 44.1%, down from 47.2% in the first quarter and lower than the 50.2% a year ago. Profit margins have been declining since reaching the peak of 63.5% in second-quarter 2022.
The average homeowner walked away with a $110,000 profit during the first quarter In the U.S.
It’s important to note that profits and profit margins are based on when the home was bought and sold. In California, homeowners generally hold on to their homes for a few years longer, which often boosts profits and profit margins. But not always, since an extended market slump will hurt home sellers.
| City | Q1 ’26 profit | Q1 ’26 profit vs. a year ago | Q1 ’26 profit margin |
|---|---|---|---|
| Bakersfield | $126,000 | -4.9% | 55.8% |
| Fresno | $149,250 | -5.1% | 59.9% |
| Los Angeles | $332,875 | -2.1% | 53.3% |
| Riverside | $200,000 | -2.4% | 54.1% |
| Sacramento | $171,000 | -18.6% | 45.1% |
| San Diego | $320,000 | -12.2% | 56.6% |
| San Francisco | $375,000 | -16.3% | 57.7% |
| San Jose | $652,500 | -7.8% | 74.8% |
Source: ATTOM Data
