Alabama Home Sales Continue to Slow in January
February 28, 2023
Alabama home sales continued to slow in January, according to the latest Alabama Association of REALTORS® (AAR) Alabama Economic and Real Estate Report. Contributing to slow sales is a 0.25% rate hike the Federal Reserve recently imposed in an effort to fight inflation that hovers at 6.4% nationally. Home prices, which decreased slightly but remain at higher levels than before the pandemic, also were a factor in the slowdown. Higher interest rates and higher prices combined to make houses less affordable and diminish sales volume. Buyers appear to be cautious about potential economic downturns affecting housing while owners may be reluctant to sell when faced with higher prices and interest rates for a new home.
Cullman real estate agent Wendy Childers sees a similar trend in her area. “In reviewing the current residential sales trends for the Cullman area, January over January is showing a decrease in the number of units that were sold. However, the median sales price has shown an increase for the same period last year.” Childers, who represents Weichert REALTORS®, says the average days on market has increased as buyers are looking longer to make sure that they get all of the bells and whistles that they want. “Our market is still robust as we are located half-way between Birmingham and Huntsville and many home buyers are more than willing to drive a little farther to get more bang for their buck in our market.”
Here’s a snapshot of market data, projections, and economic factors:
By the Numbers (compared to January 2022):
- Alabama home sales declined by 2.06% or 2,059 units. Total January 2023 sales dropped to 7,430 homes from 9,489 last year.
- The sold volume was $1.8 billion – a decrease of $0.8 billion from January 2022.
- Active listings rose by 67.4% with 11,755 compared to 7,022 last year.
- The number of days on market rose from 64 to 78 – a 21.9% increase.
- Months of supply jumped from 1.3 to 2.1.
- The median sales price dropped by $3,546 to $212,706. That’s a 1.6% decline from January 2022.
AAR’s Outlook for February:
- Alabama home sales will continue to decline by 5.7%-7%.
- The state’s median sales price also is expected to decrease in February by 3.1%.
- Sales volume, according to AAR, is projected to drop in February to $1.7 billion.
- The number of days on market is projected to decrease to 76 days.
- Listings are expected to decrease by 4.8% to 11,187.
- Inflation continues to worry consumers. The overall Consumer Price Index rose 6.4% in January 2023 compared to January 2022. Prices for must haves like food and energy increased by 10.1% and 8.7%, respectively.
- Jobs are plentiful and the nation’s unemployment rate is the lowest in more than 50 years.
- News of job growth and low unemployment are good signs, but layoffs and forecasts of an economic downturn are causing mixed signals for home buyers.
- Mortgage rates remain above 6%. January ended with a 30-year fixed rate of 6.48%.
- Buyers now face both higher average sales prices and higher interest rates which affects affordability. In January 2020, the average home price was $209,419 with an average 30-year fixed mortgage rate of 3.62%. By January 2023, the average home price climbed to $239,967 with a 30-year rate of 6.27%. The difference for homebuyers is a 2020 mortgage payment of $954 compared to a 2023 payment of $1,481.
REALTORS®understand the seasonal ups and downs of sales. Spring traditionally brings more listings and buyers. Helping clients understand the factors at play in the market is what real estate professionals do best.
John Franklin, real estate agent with Lake Homes Realty at Lake Martin, works in what he calls a “niche” market with fewer pressures from inventory and interest rates. “Lake Martin's market is just kind of holding steady right now. It's become a little bit of a buyer's market. When you have a good listing that hits the market, it generally sells within two to four weeks. It doesn't sit on the market for a long time.” Low inventory, he says, is keeping the prices fairly stable. “I would say, if we have another strong surge again this Spring, then prices might rise again.”
Are high mortgage rates discouraging potential buyers in today’s market? “Probably,” says Franklin. “They are probably discouraging clients under certain price ranges. We haven’t really seen that at Lake Martin because a high percentage of our buyers are cash buyers, so a lot of them don't borrow money from a lender. Markets with a majority of buyers under a certain price range probably will take a dip in sales if the mortgage rates continue to rise.”
Here are some take-away points for REALTORS®:
- Buyers and sellers who have a wait-and-see attitude may lose if interest rates continue to rise or sales prices continue to fall.
- Winter usually offers buyers a less competitive market in which to purchase and sellers less competition with other homes on the market.
- Sellers are more likely to see serious buyers in the off-season months.
- Mortgage processing and closing should be faster.
- Affordability will decrease if interest rates climb and inflation worsens.
- Mortgage interest rates can be refinanced if rates fall.
The goal of AAR’s Economic and Real Estate Report is to produce timely, data driven economic and market analysis, authoritative business intelligence to serve members, and inform consumers, policymakers and the media in a professional and accessible manner.