Alabama Housing Rolls on Despite National Decline, According to UA Center

TUSCALOOSA, Ala. – Alabama home sales increased slightly in June despite the nation-wide slowdown reported by the National Association of REALTORS®, according to statistics compiled by the Alabama Real Estate Research and Education Center at The University of Alabama.

The figures showed that in Alabama the number of existing, single-family homes sold in June rose to 3,470 from May’s 3,427. Only six of the 21 area Realtor associations tracked by the Alabama Real Estate Research and Education Center reported a decline in home sales. Dr. Leonard Zumpano, director of the center, said that year to date, the market is ahead of last year, although June’s sales pace is down slightly from June 2000. Through the end of June 2001, 17,539 existing single-family homes were sold as compared with the 17,299 sold in 2000. For the month, Tuscaloosa saw the largest increase in the number of homes sold with 34 more units in June than in May, while Cullman saw the largest percentage increase with a 38.9 percent jump.

Average selling price jumped significantly in June to $122,614 from May’s $118,881, the center reported. Compared to last year at this time, existing home prices are up 4.6 percent. Home prices rose in 14 of the reporting areas, declining only in Huntsville, Monroe County, Montgomery, Muscle Shoals, Phenix City, and Walker County. "Much of the increase in average selling price can be attributed to the very sizeable price increases reported in the Lake Martin and Birmingham areas," said Zumpano, who is also a professor of finance at UA. "Existing home prices in Lake Martin rose by more than $29,000 while Birmingham posted a record high average selling price of $170,543."

Average days on the market fell by nearly 5.8 percent to 146 from May’s 156, while total homes listed for June increased slightly to 28,178 from 27,652. This represents an unchanged supply from May of about eight months at the current sales pace. The new home market in Alabama, for which there is much less data, also appears strong, Zumpano said.

Residential construction permits issued so far this year are up 6.29 percent from 2000, according to F. W. Dodge reports. "This shows that at least builders are confident that the housing sector will keep on rolling in the second half of 2001," Zumpano said.

At the national level, it seems that the sluggish economy is finally beginning to impact the housing sector. The National Association of REALTORS® reported that for the U.S. as a whole, existing single-family home sales declined 0.6 percent in June to 5.33 million units as compared with May’s 5.36 million units," Zumpano said.

The median selling price leapt 8.8 percent to $152,600 from $145,000. "While this does show a decline in the sector for June, the NAR says that this year is still tied with the fifth best selling year on record and is projecting a strong finish for 2001, citing low interest rates and the resilient consumer," Zumpano said.

Zumpano said that while the rest of the economy seems to have faltered, the housing sector continues to remain strong. "Thanks to the Federal Reserve’s aggressive credit easing, mortgage rates hover near historic lows, helping to keep the housing market rolling forward as well as sparking a large refinancing boom," he said. "In fact, the cash injected into the economy by mortgage refinancing is one reason that consumer and retail sectors continue to remain robust."

Zumpano said the consensus among economists seems to be that the sluggish economy has or is about to bottom out and an upturn should be seen in the near future. If this is the case, he said, look for the employment situation to improve and the housing market to roll on to a strong finish for 2001. "The risks are mounting in the housing sector, though. If the economy continues to soften and unemployment, which has so far been largely confined to the manufacturing and high-tech sectors, continues to rise, this will eventually spill over into the housing sector," Zumpano said.

The unemployment situation looked even bleaker in June with a loss of 114,000 jobs and for the first time since the last recession, employment has contracted for an entire quarter. The second quarter also saw the slowest growth in Gross Domestic Product, or GDP, in more than 8 years, up only 0.7 percent on an annual basis. Zumpano said the best single indicator of future housing market activity is employment. "Consumer confidence erodes and people do not buy big-ticket items like homes when out of work or worried about layoffs. On a more positive note, the sagging economy may lead to another interest rate cut in August," he said.

Zumpano said the center is now receiving housing numbers on the Selma market and that area will be included in the Monthly Housing Report once three consecutive months have been recorded.

The in-state housing statistics reported refer only to existing home sales and are obtained from data provided by local area associations of Realtors, Zumpano said. "Consequently, these numbers do not include new home sales, or for-sale-by-owner transactions, and hence, are reflective of basic housing market trends and not indicative of all the monthly housing market activity that takes place within the state," he said.

The Alabama Real Estate Research and Education Center, located in the Culverhouse College of Commerce and Business Administration at The University of Alabama, is a state of the art comprehensive research facility designed to support Alabama’s real estate community and the state’s overall economic development efforts.