Alabama's Spring Housing Market Predictions

Alabama's Spring Housing Market Predictions

As the gentle warmth of spring graces Alabama, it's not just the weather that's heating up – the real estate market is also entering its busiest and most dynamic season. Homebuyers and sellers alike are stepping into action, eager to capitalize on the opportunities this vibrant time presents. For REALTORS®, it's a season of anticipation and activity. With each passing day, the landscape of Alabama's housing market transforms, fueled by fresh listings and a surge of eager buyers, setting the stage for an exciting season ahead So, what does the 2024 spring buying and selling season hold for Alabama’s real estate market? Read on to find out what AAR’s economists have to say.

According to the February issue of AAR’s Alabama Economic and Real Estate Report, Alabama experienced its first increase in home sales activity since June of last year, defying historical trends and ending seven consecutive months of decline. Typically, home sales in February decrease due to slower housing market activity in winter months. This rare increase in sales may indicate an early start to the spring buying and selling season.

“I anticipate a more active market, resulting in increased home sales this spring compared to spring 2023,” said Dr. Evan Moore, an economist at AAR and a professor at Auburn University Montgomery. “Several factors contribute to this, including consumer sentiment being up roughly 28 percent compared to this time last year, a slight increase in home builders’ sentiment, and higher active listings compared to one year ago. These trends are expected to persist through the spring.”

The increase in active listings in February, up by 26.9% year-over-year, suggests that more homes will continue to hit the market this spring. Additionally, the Housing Market Index indicates favorable conditions for home builders. With a higher inventory of homes and a slight dip in prices, the scales tip in favor of buyers this spring.

“Aspiring homeowners should expect to see more variety in the types of homes available and prices starting to normalize relative to the peaks seen in 2022,” Dr. Moore added. “However, mortgage rates are unlikely to drop significantly during the spring. Ten-year Treasury yields have generally risen through the start of the year, and inflation has remained above the Fed’s 2 percent target. The earliest the Fed might cut rates would be June.”

Although a cut to the fed funds rate could potentially lower lending rates, Dr. David Hughes, another economist at AAR and a professor at Auburn University Montgomery, notes that rates are likely to remain above the levels seen in previous decades. Despite this, there is optimism in the air as mortgage rates decreased from 6.94 percent to 6.74 in March, hinting at possible further drops in the coming months, even without a projected cut from the Federal Reserve.

“Much the same way people initially refused to travel during the coronavirus pandemic but finally grew weary of travel restrictions and started swarming beaches and vacation spots, it appears that homeowners will get over their initial reluctance of higher mortgage rates and resume buying and selling homes,” Dr. Hughes observed.

While the economy might not be bouncing back as swiftly as consumers desire, indicators point towards a favorable spring as homeowners acclimate to this new normal.

“The signs are beginning to move back into a healthier direction for Alabama’s housing market,” said Dr. Hughes. “There is an expectation that the Fed will cut interest rates at some point this summer. We are seeing evidence that supply is coming back. To a certain extent, people are beginning to have this interest rate reality that they can’t sit on their properties forever.”

As supply returns and homeowners come to terms with the reality of interest rates, the outlook for the spring housing market appears promising.