Mixed Signals In The Housing Market, According To UA Center

TUSCALOOSA, Ala. ­ The total number of homes sold in Alabama during September, as reported by local REALTOR® associations, slipped 17.5 percent to 2,692 from August’s 3,263, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

“While this represents a sizeable month-to-month decline, the total number of homes sold is down only slightly from the same time last year, which was a very good year for the housing market,” said Dr. Leonard Zumpano, the center’s director.

Zumpano said the average selling price also declined in September, down 3.9 percent from August. Average selling price is also down slightly compared to September of last year. For the year, however, existing home prices are still up about $4,500 per home compared to the first nine months of 1999. Despite the decline in total homes sold and average selling price in September, changes in home prices and units sold are tracking at about the same pace as a year earlier.

Zumpano said the supply of existing homes fell slightly in September with 24,744 homes for sale compared to August’s 25,582. At the current rate of home sales, this represents almost a 10-month supply of existing housing units, compared to slightly less than an eight-month supply in August. “No yearly comparison can be made for the total number of homes listed for sale as we only added this statistic in May of 2000,” Zumpano said.

At the local level, existing home sales decreased in 15 of the 19 reporting areas, remained unchanged in three locations, and actually rose in Monroe County. Existing home prices fell in 11 locations and rose in the other 7 reporting locations. Phenix City, with an average selling price of $123, 307, reported a record high selling price in September, while some of the other locations reported higher selling prices with increases between $10,000 and $12,000.

On the national level, The National Association of REALTORS” reports that existing home sales and the average selling price also declined during September, down 18 percent and 3.3 percent, respectively. “While these percentages are based on preliminary numbers for September, they echo what we are seeing at the state level,” Zumpano said.

At the same time the existing home market appears to be slumping, the U.S. Commerce Department reported the number of new, single-family homes sold jumped 9.2 percent to an annual rate of 946,000 units in September. “This is the highest rate of increase since March and well above the rate forecast by economists,” Zumpano said.

“While the recent decline in long term mortgage rates may explain part of the upsurge in the new home market, one can’t help wonder why lower financing costs didn’t buoy the market for existing housing.”

What lies ahead for the housing market may be reflected in some of the recent statistics provided by The National Association of Home Builders (NAHB), Zumpano said. The NAHB reported housing starts were virtually unchanged for September, rising 0.3 percent, while total building permits rose only 1.3 percent.

“What we seem to be confronting here are diverse forces at work on the housing market,” Zumpano said. “On the one hand, we have attractively low mortgage interest rates, high employment and rising worker productivity that has allowed for sizeable increases in wages without generating inflationary pressure. On the other hand, we have seen the growth in Gross Domestic Product cut almost in half during the third quarter.

“Recent declines in the stock market, along with the oil and the Middle East political crises, have been accompanied by a serious erosion of consumer confidence. If the equity markets remain bearish, this could decrease real wealth and shake consumer confidence still further, putting downward pressure on the demand for durable goods such as housing.”

For now though, Zumpano said, “We need to keep a close eye on the economy and the housing market in the hope that we may be able to discern the direction market forces will take over the remainder of the year.”

The University of Alabama Culverhouse College of Commerce and Business Administration, founded in 1919, is home to the Alabama Real Estate Research and Education Center. The Center works with the Alabama Association of REALTORS, the Alabama Real Estate Commission and the research division of the National Association of REALTORS to compile a state housing affordability index each quarter.