Alabama’s housing market continued its steady path toward recovery through the first half of 2025 with gains in sales, prices, and inventory helping to bring the market closer to pre-pandemic patterns. Despite continuing economic uncertainty, key indicators point to a housing sector adjusting to a new equilibrium.

Here’s a look at the market’s performance so far — and what buyers, sellers, and real estate professionals alike can expect for the rest of the year.

Through May, Alabama recorded 29,364 home sales year-to-date, an 8.5% increase compared to the same period in 2024. The median sales price also rose 8.5% year-over-year, while active listings at the end of May stood at 19,709 — a nearly 25% increase from one year ago — offering buyers more options than they’ve seen in years.

Labor market stability has also supported housing activity. Alabama’s unemployment rate held steady at 3.3% for eight consecutive months; while it marks the highest rate since July 2021, it remains nearly a full percentage point below the national average. Labor force participation reached a record-high 57.9% in April following three months of increases.

With the first half of the year trending toward what experts consider a return to typical market behavior, here are five predictions for Alabama’s housing market in the second half of 2025:

1. Interest Rates Will Continue to Normalize

Buyers are increasingly adjusting to mortgage rates in the 6.5–7% range, which historically align with long-term averages. Perceptions of rates are shifting away from the pandemic-era lows that distorted expectations.

“I suspect that borrowing costs, which seemed high compared to pre-pandemic days, are starting to feel normal again,” said AAR economist David Hughes. “I think for some time following the pandemic, we saw buyers and sellers sitting on the sidelines waiting for economic forces to return to status quo. To a certain extent they never did, and you can’t expect individuals to sit out of the housing economy forever.”

2. Political Landscape Could Drive Mixed Signals

While Alabama’s housing market has benefited from perceptions of growth-friendly policies under the current Republican administration, uncertainty related to ongoing trade disputes could introduce new headwinds for buyers and sellers.

“I suspect that the change in presidential administrations has been a boon to the housing economy, but I’m still awaiting a market response to uncertainty from trade disputes.” Hughes said. “We’ve yet to see the inflationary effects many economists believe could accompany higher tariff rates.”

3. Seasonal Trends Will Hold

As is typical, Alabama’s housing market should see stronger activity through the warm months before slowing as colder weather and the holiday season approach.

“We typically see some seasonality in prices, with annual highs in early-to-mid summer,” Hughes said. “Past that point, prices generally ease heading into the winter months, reflecting lower demand during the colder months. I anticipate we will see that typical seasonality on display.”

4. Labor Market Will Support Demand

With Alabama’s unemployment rate lower than the national average and labor force participation rising, more households could be positioned to enter or move up in the housing market, supporting ongoing demand.

Recent data also indicates that Americans have reduced non-mortgage personal debt, which could bode well for consumers — especially first-time buyers, Hughes notes.

5. Plenty of Listings, But Construction Uncertainty Looms

Alabama’s housing market has seen active listings rise to their highest levels since 2020, giving buyers more options and helping stabilize conditions after years of tight supply.

However, new construction trends are mixed. While AAR’s monthly “Economic and Real Estate Report” projects building permits could rise modestly in the near term, builder sentiment in the South has dropped to its lowest level since 2012, reflecting concerns over high costs and cautious buyer demand. Additionally, Alabama’s construction sector was the only major industry to report job losses from March to April, shedding 1,400 positions.

Rather than boom or bust, Alabama’s housing sector is showing signs of returning to a normal state. Strong employment figures, higher inventory levels, and steady buyer activity suggest a more balanced market ahead, but lingering affordability pressures and broader economic uncertainty could shape how the rest of 2025 unfolds.