State Housing Market Slows, Still on Track to Set Record, According to UA’s Real Estate Center

TUSCALOOSA, Ala. – Existing home sales in Alabama slipped 1.8 percent in June to 4,345 units, according to figures released by the Alabama Real Estate Research and Education Center at The University of Alabama.

But according to the center’s director, Dr. Leonard Zumpano, “This decline does not come as a surprise after May’s record setting 4,424 homes sold. In fact, June’s figure for number of homes sold is the second highest on record behind May’s.” Zumpano said the average selling price of a house fell 4.8 percent to $122,442. Supply rose to 6.17 months in June from 6.15 months in May.

Year-to-date, home sales in Alabama are still up 16.3 percent over the same time last year, according to the center. Only three areas have recorded fewer homes sold when compared year-to-date with June of 2002; those areas are Gadsden, Lee County, and Marshall County. The statewide average selling price is up 3.1 percent; which is about half of 1 percent appreciation per month.

Jimmie Ann Campbell, 2003 president of the 10,000 member Alabama Association of REALTORS® said, “ The June 2003 numbers confirm what families all across the state are telling us, it’s a great time to buy a home in Alabama. Interest rates, housing selections, locations and, most of all, housing affordability, right now make it time to buy.”

Despite the slip in the total number of homes sold across the state, there are eight new records to report. Baldwin County, Cullman County, and Lee County all set records for the highest number of homes sold in one month, as did Mobile and Montgomery. Dothan, Huntsville and Montgomery set records for the highest recorded average selling price.

The number of existing homes at the national level sold slipped 0.3 percent to 8.53 million units on an annualized, seasonally adjusted basis, according to the National Association of REALTORS®. Median selling price is up to $176,500, an increase of 7.7 percent compared with June of 2002. Supply increased slightly to 5.1 months in June from 4.8 months in May.

Residential construction spending increased at the national level as well, inching up 0.7 percent to $322.1 billion in May on a seasonally adjusted annual basis, according to the U.S. Census Bureau. The Consumer Price Index, the most popular gauge of inflation, increased 0.1 percent in June to 183.7 as tracked by the Bureau of Labor Statistics. The Producer Price Index for Finished Goods, generally considered a leading indicator for inflation, rose 0.5 percent in June to 142.6. According to these metrics, the deflation that many economists feared has not shown itself.

The U.S. employment situation worsened for the fifth straight month in June, shedding a total of 30,000 non-farm, payroll jobs. The latest decline pushed the nation’s unemployment rate up to 6.4 percent, the highest level in nine years. Economic growth on the order of 3 percent per year is needed to bring jobs back into the economy, which the National Association of Realtors is forecasting to happen in the third quarter of this year. On a more positive note, the state unemployment rate remained unchanged at 5.7 percent, according to the Alabama Department of Industrial Relations.

At the state level, the fall in home sales and prices, taken with the slight increase in supply, suggest some softness in this sector, but one month’s numbers do not constitute a trend, Zumpano said. According to data released July 23 by the Mortgage Bankers Association of America, the national average for a 30-year, fixed rate mortgage increased to 5.72 percent from 5.33 percent one week earlier, with average points increasing to 1.53 from 1.47.

Historically low mortgage rates have kept housing affordable in an otherwise uncertain economic environment. They have also worked to offset sharply rising home prices that a number of locations in the U.S. have recently experienced. A national average mortgage rate of 5.72 percent for a 30-year mortgage is still very low by historical standards, but the increase may have a negative impact on the housing sector in the next few months, especially if rates and home prices continue to rise, according to Zumpano.

“Fortunately for Alabama, though housing prices have been increasing, the rate of increase has been very moderate and in line with the increase in household income,” he said. “Therefore, housing affordability remains high in most locations within the state. While a slowdown may be in the offing some time in the future, the NAR is predicting yet another record setting year for home sales in 2003.”

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.