July Home Sales Selling Price Decline Slightly, According to UA Center

TUSCALOOSA, Ala. - Existing home sales in Alabama declined slightly in July to 3,410 units, 60 homes less than reported in June, according to figures from the Alabama Real Estate Research and Education Center at The University of Alabama.

The average selling price also fell marginally to $121,882 from $122,614 reported for June, the center said. Total homes listed also remained relatively unchanged at 28,020 units while average days on the market declined 5.4 percent to 139 days from 147.

Dr. Leonard Zumpano, director of the UA center, said the decline in home sales, coupled with the relatively unchanged number of homes on the market, caused supply to creep up to 8.2 months at the current sales pace. This represents an increase over June’s 8-month supply figure.

“Despite the modest sales slowdown, we have a couple of records to report,” Zumpano said. “First, Lee County set an all time high for number of homes sold for the second month in a row with 91 units. Secondly, Montgomery set an all time high average selling price of $134,730, as well as reporting its lowest average days on market since June of 1996 at 85 days. These records come in spite of 13 out of the 20 reporting area associations showing a decline in home sales and 11 out of 20, just over half, reporting a decrease in average selling price.”

Zumpano said Huntsville saw the largest increase in home sales with a 20 percent rise to 508 units sold in July as compared to June’s 424 units sold. Lake Martin reported the highest average home selling price in Alabama despite a 10 percent decline to $179,098 from $199,483. Monroe County saw the largest percentage increase in average selling price with a 55.5 percent jump to $95,308, which is also well above Monroe County’s year to date average for 2001 of $91,964.

Zumpano said new residential and commercial construction in Alabama, as reported by F.W. Dodge, have been showing signs of slowing in the past few months. Statewide, contracts for future nonresidential construction declined 41 percent in July, but are still 1 percent ahead of last year at this time. Residential construction increased by 10 percent between June and July to $202.7 million, but is down 5 percent for the year.

According to Zumpano, the picture varies across the state. Construction, both residential and commercial, is soft in the Dothan and Florence metro area markets, he said. “In contrast, residential and nonresidential construction spending is ahead of the same time last year in the Huntsville market. In Birmingham, nonresidential construction is up about 9 percent from July of last year, but the residential construction is down some 12 percent during the same time period. The other metro areas report similarly mixed results; in some markets new residential construction is rising, while non-residential construction is in decline, or just the reverse is true.”

Overall, Zumpano said, the numbers paint a somewhat mixed picture for Alabama’s housing market but do indicate some signs of a slowdown in some local markets. Even with a mild slowdown, however, Alabama’s housing market is still rolling along by historical standards. The pace of existing homes sales is ahead of last year, up 3.3 percent from July 2000. Average selling price is up 2.1 percent to $117,801 from $115,364. Even the national housing market, which has been in decline for the past two months, is still on track for a near record setting year, according to the figures recently released by the National Association of RealtorsÒ.

Nationwide, sales of existing, single-family homes dipped 3 percent in July to a seasonally adjusted rate of 5.17 million units, and the median sale price declined almost 1 percent. This follows on the heels of a 0.6 percent decline in June, which makes two consecutive months of retraction, Zumpano said. “While housing activity tends to fluctuate from month to month, this is the first two-month decline since October of 2000. On the other hand, the sale of new single-family homes rose in July to a seasonally adjusted rate of 950,000, a 5 percent increase over June,” he said.

“We noted in earlier housing reports that the health of the housing sector is heavily dependent on employment, as changes in employment also impact directly both incomes and consumer expectations, which also drive the housing market. Remarkably, the national housing market has remained robust despite growing layoff and rising unemployment.

“In fact, there is evidence to suggest that it has been the very strength of the housing market with the accompanying growth in home values that have helped shore up consumer spending, the engine that largely drives our economy. It has been this same growth in real estate equity that has supported the growth in consumer debt through home-equity loans.

“Low mortgage rates have also helped as refinancing has put a lot more money into the economy. The growth in home-equity related debt, much of which is sub-par, is, however, a double-edged sword. If property values begin to fall and unemployment continues to rise this could precipitate a major credit crunch, which would have a serious and depressing impact on consumer spending,” Zumpano said.

Zumpano said the employment situation worsened again in June (the last month for which data is available) with a loss of 42,000 non-farm jobs. He said Challenger, Gray, and Christmas, an employment firm, reported that through August, total job cuts climbed to 1.12 million. “Gross domestic product, the broadest measure of economic activity, grew at a very low 0.2 percent in the second quarter of 2001, the weakest it has been since the first quarter of 1993 according to the Commerce Department,” Zumpano said. “Accordingly, consumer confidence fell in both July and August, moving from 118.9 in June, to 116.3 in July and finally to 114.3 in August.

Although Alabama’s economy is not immune to the economic changes taking place at the national level, so far employment has remained strong in many of the state's larger metro areas, such as Huntsville, Birmingham, Anniston, and Tuscaloosa. “It is not coincidental that these are some of the same locations where new manufacturing plants are now in operation, under construction, or expanding. As a result, the housing markets remains strong in these locations,” Zumpano said. “However, if the economy continues to contract, Alabama housing markets will eventually soften.”

On the positive side, the Federal Reserve has signaled that it will continue to lower interest rates if the economy continues its slide and the U.S. manufacturing sector is beginning to show some promising signs of recovery, according to Zumpano. “If this is in fact the case, Alabama’s housing market may still end the year near record levels,” he said.

EDITOR’S NOTE: The in-state housing statistics reported here refer only to existing home sales and are obtained from data provided by local area associations of Realtors. 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 transactions that take place within the state.

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.