Alabama’s housing market entered 2026 with reserved optimism, and through the first quarter, that outlook has largely held. Some of the hurdles economists flagged late last year have materialized, but the overall Q1 story remains one of gradual normalization. Inventory is improving and price growth remains steady.

While transactions are still trailing last year's levels, the market is behaving much as forecasts suggested: more balanced, but not without friction.

January followed a familiar seasonal pattern, with transactions dipping after the year-end push. The state recorded 4,761 transactions, down both month-over-month and year-over-year. This slowdown coincided with historical trends and economists' expectations.

While transaction activity chilled, median home prices rose 17.3% year-over-year to $244,520, reinforcing one of the key predictions heading into 2026: continued appreciation, though at a more moderate pace than during the pandemic boom. At the same time, active listings increased 7.5% annually, indicating the early stages of the inventory growth economists anticipated.

Even amid declining national consumer confidence, Alabama’s low unemployment rate — at 2.7% — remained a steady source of optimism. This pattern was specifically highlighted in earlier forecasts, and Q1 data suggest it continues to underpin housing activity across the state.

February’s housing market began to respond to early signs of seasonal demand. Transactions rose 5.6% from January to 5,028, while days on market dropped, falling by more than two weeks year-over-year. Lower mortgage rates helped pull some consumers off the sidelines, validating predictions that even modest rate relief could stimulate activity.

The year-over-year comparison tells another story. Transactions were still down 14.6% compared to February 2025, indicating the continued impact of affordability challenges and macroeconomic uncertainty. This is consistent with the “tug-of-war” that economists warned about: seasonal demand pushing activity forward, while inflation concerns, geopolitical strains and labor-market questions apply counterpressure.

Inventory trends also tracked closely with projections. Housing supply reached 5.4 months, up significantly from the same time last year and firmly within the range economists identify as indicative of a more balanced market. Rather than a rapid shift toward a buyer’s market, Q1 has shown a steady move toward equilibrium.

March data reinforced the seasonal rising trajectory, with transactions increasing 8.2% month over month to 5,438. The spring buying season brought renewed activity, but the gains remained subdued compared to previous years. Transactions were still down 12.5% year-over-year, highlighting a consistent Q1 theme: improvement, but not full recovery.

In March, the median home price climbed to $262,009, up an impressive 20.8% from last year. This sustained appreciation confirms another prediction: that strong homeowner equity would persist even as other metrics fluctuated.

Inventory gains remained steady, with active listings rising 10.5% year-over-year and housing supply holding at 5.3 months. This reinforces the narrative that Alabama is operating in a more balanced environment, one where consumers have more options, but demand remains sufficient to support price stability.

One of the most closely watched variables entering 2026 was mortgage rates. Economists suggested that consumers were becoming accustomed to rates above 6%, and Q1 appears to support that shift. March’s average 30-year fixed rate of 6.18%, while slightly higher than earlier in the quarter, remains historically aligned with long-term averages.

Rather than deterring activity entirely, rate fluctuations seem to be influencing timing. February’s brief dip in rates spurred faster decision-making, while March’s increase did little to halt momentum. This reflects a consumer mindset that's less rate-driven and more focused on overall affordability and opportunity.

Several projections from late 2025 and early 2026 have come to fruition. The most notable is the continued move toward a balanced market. With housing supply hovering between five and six months throughout the quarter, Alabama is aligning closely with the equilibrium forecasted by economists.

Price growth has also remained resilient, though not without consequence. While rising values benefit homeowners by increasing equity, they continue to challenge affordability — a key tension shaping transaction volume.

Additionally, the expected increase in inventory is materializing, giving consumers more choice than in recent years. This has contributed to slightly longer days on market than in prior cycles, though homes are still moving at a healthy rate overall.

Foreclosure activity, another area economists flagged, has begun to rise on both a monthly and annual basis. While still historically low, this trend is one to monitor, especially as broader economic uncertainty continues.

As Q1 transitions into the heart of the warm weather season, the housing market is shaping up to be less about rapid swings and more about how effectively REALTORS® can interpret and act on mixed signals. Seasonal momentum is clearly building; inventory is creating more pathways for consumers to re-enter the market and price growth continues to support long-term equity. But none of it exists in a vacuum. 

Mortgage rate movement, affordability pressures and lingering economic questions will continue to influence behavior on both sides of the transaction. The opportunity in the months ahead lies in reading these conditions in real time and guiding consumers through a market that is still very much in motion.