The first quarter of 2025 provided evidence of renewed energy in Alabama’s housing market as month-over-month growth in home sales and listings reflected rising consumer confidence, while mortgage rates and affordability presented a more complex picture.

But as the market heads into the traditionally busier spring and summer months, Q1’s trends look hopeful — yet nuanced.

Here’s a look back at Q1 market activity and what that might mean for the rest of the year.

Following a slower end to 2024, Alabama’s housing market entered the new year with steady momentum. Sales rose each month of Q1:

• January recorded 5,259 home sales — an increase of 4.6% from December and nearly 10% higher than January 2024.
• February saw an even larger jump to 5,886 sales, up 11.9% month-over-month and 9.1% year-over-year.
• March closed the quarter with 6,214 sales, marking a 5.6% rise from February and a striking 23.2% increase compared to March of last year.

Active listings followed a similar pattern, climbing to 18,415 by the end of March — a 26.2% increase over the same time last year. 

Home prices followed a less linear path during Q1 but ultimately trended upward, especially in March.

• The January median sales price was $219,936 — a modest decrease from December but still 4.2% higher than the same time last year.
• In February, the median dropped to $211,020 yet remained 5.3% higher than February 2024.
• March, however, brought a sharp rise to $230,000 — a 9% increase from the prior month and a 13.4% gain year-over-year.

These pricing dynamics suggest buyers are returning to the market — but so is competition. While the jump in March could be seasonal, it also underscores the continued challenge of housing affordability, particularly for first-time homebuyers. Still, Alabama remains more affordable than many other markets nationwide, a key advantage for buyers seeking value.

Expectations for a construction rebound in 2025 were met with tentative optimism.

• January permits totaled 1,248, up a slight 0.6% from a year ago.
• February saw a 4% increase in permits from the month prior yet remained 4% lower than February 2024. 

While permits were trending in the right direction early in the year, builder confidence showed signs of softening in March. Factors such as fluctuating material costs, ongoing labor shortages and uncertainty around long-term interest rates are likely contributors to hesitancy in the construction sector.

Though less volatile than in recent quarters, mortgage rates remained a focal point for both buyers and sellers:

• Rates reached 7.04% in mid-January before falling to 6.87% in mid-February.
• By the end of February, rates dropped to 6.63%.
• In mid-March, they ticked up slightly to 6.67%, then 6.85% by mid-April.

Rates under 7% — while not near pandemic area lows — are still in line with historical trends, and are becoming viewed by many as the “new normal.”

Homes spent less time on the market as the quarter progressed, consistent with rising buyer activity as the market headed into spring:

• January: 84 days on market
• February: 79 days
• March: 61 days — though still higher than the 55 days recorded in March 2024

Overall, Q1 showed signs of normalization after several unpredictable years. Alabama’s economy is also contributing to housing health, with real gross domestic product, commonly known as GDP,  growth outpacing the national average and inflation cooling — a welcome development for buyers concerned with affordability.

A few key trends will be worth watching as the year continues:

• Inventory: Continued growth will shape market balance and influence pricing.
• Construction: Builder sentiment and capacity will determine how quickly new housing can meet demand.
• Rates and Inflation: Interest rates remain a key lever influencing affordability and buyer urgency.
• Affordability: Affordability might remain a persistent concern, especially for first-time and lower-income buyers.

Taken together, Q1 offers a cautiously hopeful outlook for Alabama real estate. If current trends hold, 2025 may deliver a more balanced, active and accessible market for buyers and sellers alike.