After a year defined by rising prices, steadier inventory, and a late-year cooldown, Alabama’s housing market is closing out 2025 on firmer footing than many expected. The traditional seasonal slowdown kicked in this fall — with October home sales down nearly 5% from September — yet the broader picture points to stabilization rather than softening.

Median home prices climbed nearly 20% year-over-year, even as active listings increased. October’s 20,866 active listings represented an 8% jump from last year, giving buyers more options even as values continued to rise. 

As 2026 approaches, Alabama REALTORS® economists Evan Moore and David Hughes expect the market’s gradual normalization to continue. 

Here’s what they say buyers, sellers, and industry professionals should watch in the year ahead.

A full buyer’s market takeover remains unlikely, Moore said — but balance is coming into view.

“A direct shift into buyer’s market territory remains unlikely in the coming year,” he said. “But it should move toward a more balanced market with five to six months of supply.”

Hughes agreed, noting that timing and broader economic forces will play an outsized role.

"The winter months are almost always the slowest for the housing market," he said. "Long-term projections get trickier given competing market dynamics."

Rising prices could encourage more homeowners to list, increasing supply and potentially easing price pressure. At the same time, lower mortgage rates — should they materialize — could offset those effects by fueling demand. Add in increased consumer strain, including rising foreclosures, credit card defaults, car loan delinquencies, and the restart of student loan payments, and the outlook becomes more complicated.

"Consumers are deeply uncertain about the economy," Hughes said. "If these factors tip us into a recession, prices would likely come down — but that would be of little comfort to would-be buyers facing job insecurity or diminished credit."

Sellers are likely to see another year of appreciation, Moore said, though not at the double-digit pace of the pandemic-era boom.

Higher-end homes are projected to continue moving quickly, while homes in more competitive price ranges may sit longer as inventory grows. Sellers in those segments should be prepared to price strategically and expect more negotiation.

Hughes agreed that 2026 could be favorable for sellers, assuming current trends hold.

"Median and mean sales prices have been on a significant upward swing," he said. "But economic uncertainty rarely works in sellers’ favor. When consumers are unsure, they sit on their capital."

Mortgage rates remain an important factor, but buyer psychology has shifted.

"Buyers are becoming accustomed to rates above 6% for 30-year mortgages," Moore said. "These rates have been above 6% for over three years."

Hughes echoed that sentiment, noting that while rate cuts still influence activity, most buyers have accepted that pre-2020 rates aren’t returning anytime soon.

Economic uncertainty continues to loom over the housing market as 2026 approaches. Tariffs, lingering inflation, government shutdown impacts, and delayed data reporting are all contributing to a less predictable environment.

"Tariffs will keep the cost of construction materials elevated, driving up the cost of new construction and making repairs to existing houses more expensive," Moore said.

Still, Alabama's strong labor market, unemployment rates below the national average, and continued net migration should help support housing activity.

Yet the unknowns are plenty, and Hughes notes that they could weigh on both buyers and sellers.

"Uncertainty is typically a drag on the economy," he said. "Shutdowns, tariffs, and an uneasy job market don’t help the housing market — it simply remains to be seen if they will hurt it."

He also pointed to one additional factor to watch: potential labor shortages tied to immigration policy changes, which could further pressure housing prices if workforce availability tightens.

New construction is likely to face ongoing challenges, Moore said, citing the 7.5% year-over-year decline in building permits.

"The supply of new homes will continue to face hurdles — higher material costs, potential labor scarcity, and first-time buyers struggling with down payments," he said. "Builders will likely need to continue offering rate buydowns and other incentives, especially while rates remain above 6%."

Alabama’s housing market enters 2026 more balanced than it has been in several years. Inventory is rising, buyers have more choices, and price growth has moderated from pandemic-era spikes — all signs of a market gradually returning to normal.

Still, both Moore and Hughes emphasize the year will be shaped as much by the broader economic climate as by the housing fundamentals themselves. How those forces ultimately play out remains to be seen.