Alabama’s Housing Market Decline Continues in the New Year

Alabama’s Housing Market Decline Continues in the New Year

The January 2024 Alabama Economic and Real Estate Report released by the Alabama Association of REALTORS® reveals that the state’s January housing market saw continued decline with AAR’s economists noting, “the decrease in sales is expected during the winter months, and average mortgage rates above 6.6% likely hampered sales.”

The nine-week decline in the average 30-year fixed mortgage rate, which began in early November 2023, ended with the start of 2024. Mortgage rates increased by less than a tenth of a point in January, rising from 6.62% to 6.69%. 

Market Stats Jan2024 Social

Since that time, mortgage rates increased again in mid-February to 6.77%, and a combination of recent positive national economic news and higher than expected inflation has put upward pressure on mortgage rates, which reduced likelihood of cuts to the feds funds rate target.

According to AAR’s economists, June 2024 is the earliest that a cut to the fed funds rate might occur.

“Many homeowners are reluctant to surrender their current, locked-in, lower mortgage rates in order to purchase a new home with the current higher rates,” Alabama REALTORS® CEO Jeremy Walker said. “Until the Federal Reserve provides relief in the form of rate cuts, Alabama and other states will continue to battle the same economic headwinds that have plagued the industry for the last year.”

Data from the January report shows that 85.4% of mortgage holders in Alabama have rates below 6%, and with mortgage rates currently in excess of 6%, it results in homebuyer reluctance, which is commonly known within the industry as “rate lock.”

As predicted, home sales in Alabama dropped throughout January 2024, marking the seventh consecutive month of decline. There were 4,686 home sales in January, a 42.1% decrease year-over-year and the lowest sold dollar volume recorded in 5 years.

While a majority of Alabama’s housing market is down, affordability is improving as median and average sales prices declined in January as compared to December. The decrease in sales prices indicates more sales activity in less expensive housing relative to last month. 

“We believe the arrival of the spring and summer months will bring welcome activity to the housing market and help kickstart what we hope will be a turnaround,” said Senia Johnson, 2024 President of Alabama REALTORS®.