Recap of Alabama’s Fall 2023 Housing Market

Recap of Alabama’s Fall 2023 Housing Market

Autumn leaves weren’t the only things falling in Alabama during the picture-perfect days of September, October, and November.   Home sales and sales prices tumbled as homebuyers’ hopes for affordable homes and sellers’ expectations for big gains fell as well.   But there were a few bright spots through the autumn months including a hint of better mortgage interest rates in the coming year.  Here’s a recap of Alabama’s fall housing market with insights from a member of the Alabama Association of REALTORS® economic research team.


The Ups: Mortgage Interest Rates, Listings, Listing Prices, and Foreclosures

“The big story would be mortgage rates,” according to Auburn University at Montgomery economics professor Dr. Evan Moore, who is part of AAR’s economic research team.  “The average 30-year fixed-rate mortgage increased throughout September and October to a peak of roughly 7.8% before declining in November. Even with the November decline, the average 30-year rate remained above 7% during all three months. In fact, this period was part of a 17 week stretch with rates over 7%. These elevated rates hampered sales activity by stretching affordability for buyers while exacerbating rate-lock for existing homeowners who may have otherwise considered selling.”  November rates fell to 7.22% and to 6.95% by mid-December.  

Active listings increased moderately throughout the fall with a 13.9% jump in September, a 16.5% increase in October, and up 17.4% in November compared to the same months in 2022.  That’s a seasonal increase of 15.9%.  Potential sellers, many locked into much more favorable mortgage interest rates, appeared hesitant to list knowing they would face higher rates on a new home purchase.

Housing supply, an estimate of the number of months it would take for all houses on the market to sell, rose more than 79% during the fall.  

Foreclosures in Alabama also rose.   With a slight 0.2% increase in September, followed by double-digit increases in October and November at 11.2% and 11.9%, respectively, the fall 2023 increase in foreclosures averaged 7.76%.


The Downs: Sales Transactions, Sales Prices, Sales Volume

September, October, and November saw significant drops -- in excess of 38% -- in the number of home sales.  Part of a now five-month slide, autumn home sales decreased to a three-month average of 5,571 units.    

Median sales prices also decreased over the most of the autumn months.  September prices fell by $15,534 followed by a $17,016 drop in October.  On a brighter note, prices rose by $1,685 in November – the first increase in 2023.  Higher mortgage interest rates contributed to the slump by pushing homeownership out of reach for some buyers.  The supply of available homes continued to rise September through November with more than three months’ supply in each of those months.   Housing supply rose more than 70% during the fall.  A higher supply favors lower sales prices as sellers compete for buyers.

The average sales price for a home in Alabama decreased by 5.4% during the autumn months to $231,343.  The average sales price is determined by the total of all sales in dollars divided by the number of homes sold.

Sales volume, the combined sales prices of all the homes that closed during the fall months, reflected the losses in average and median sales prices.  Volume fell by $1 billion in September, $0.9 billion in October, and $1 billion in November for a seasonal average of j0.96 billion.


Economic Conditions

Autumn began with the national inflation rate holding steady and ended with declines in inflation and the Consumer Price Index in October and November.  Food prices, however, continued to increase throughout the fall.  In the South, food prices rose but energy prices declined in October and November.  

Alabama’s unemployment rate continues well below the national rate but the state’s labor force participation rate, the number of Alabamians actively seeking jobs, is low.  Under ideal circumstances, unemployment rates should be low and labor force participation rates high.    

The Alabama housing market – with record-high listings and supply – appears poised to rebound in 2024.  The Federal Reserve has hinted at four possible rate cuts in 2024 which could kickstart a sales revival coinciding with the traditional spring market uptick.