Housing Market Flexes its Muscles in May, According to UA Center’s Data

TUSCALOOSA, Ala. – The nation’s housing market demonstrated its strength in May. Existing home sales increased 2.9 percent to a seasonally adjusted rate of 5.37 million units from 5.22 million units in April, according to the National Association of REALTORS®.

The largest increase was seen in the South, with a jump from 2.11 million units to 2.19 million units, according to data from the Alabama Real Estate Research and Education Center, part of the Culverhouse College of Commerce and Business Administration at The University of Alabama.

According to the Center, the median selling price inched up 3.1 percent to $185,400 from $179,900. The median selling price represents the middle of the data, where half of the homes sold for less and half sold for more.

“While the increase was not widely predicted, it is not a big surprise,” said Dr. Leonard Zumpano, director of the Center. “Consumer confidence snapped back in May despite the less than stellar employment figures for April. Although mortgage rates steadily increased during May, they remained near historic lows. Moreover, the employment numbers looked much healthier in May with a total decrease in non-farm payrolls of 19,000, as compared to the loss of 182,000 jobs in April. Historically low mortgage rates and confident consumers have kept the housing market strong so far this year.”

Zumpano said the housing sector really shined at the state level. Total homes sold increased in 16 of the 21 areas tracked by AREREC. Overall, total homes sold jumped 14.7 percent in May, with an increase to 3,427 units from 2,987. Eighteen of the 21 areas saw an increase in average selling price. Jackson County saw the largest move with a jump from $99,385 in April to $170,214 in May. Average days on the market remained relatively unchanged at 156 days in May, up from 154 days in April.

Total homes for sale decreased to 27,652 from 27,005. This represents an eight-month supply at the current level of sales, down from a 9-month supply in April. If the housing market continues to tighten, higher home prices could be seen in the months to come, Zumpano said.

“The healthy overall increase in demand reflects confident consumers taking advantage of attractively low interest rates that were widely believed to have bottomed out,” Zumpano said. “Mortgage rates have actually begun to inch down in recent weeks with the average 30-year, conventional, fixed rate mortgage at 7.15 percent in May slipping to 7.11 percent as of June 28.

“The decrease could be short lived, however, when one considers that mortgage application rates have been on a steady increase since early May and the Fed funds rate is at a seven year low of 3.75 percent. Demand stemming from these factors could easily cause mortgage rates to creep back up again.”

The numbers are all up for the year-to-date as well. Total homes sold in 2001 are at 14,069 units, as compared to 13,635 units sold by May of last year. Average selling price is up a little over 1 percent for May of 2001 at $116,152. Average days on the market are up to 156 days from 145 days. The relative stability of the year-to-date numbers is indicative of the underlying strength of the Alabama housing market, Zumpano said.

“Look for the housing sector to remain healthy in the near future, with some variation from month to month. Rising consumer confidence, an improving employment outlook, and attractively low mortgage rates should keep demand for homes on a roll in Alabama,” according to Zumpano.

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.