July Home Sales Highest on Record with 4,872 Units, According to UA’s Real Estate Center

TUSCALOOSA, Ala. – Existing home sales in Alabama increased 11.5 percent in July to 4,872 units, making July sales the highest recorded in a single month, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

May’s numbers came in second and June’s came in third. Average selling price increased 3.9 percent to $124,844. Supply declined to 5.5 months in July from 6.2 months in June, according to the Center’s numbers.

Year-to-date home sales in Alabama are up 18.1 percent over the same time last year. Only two areas have recorded fewer number of homes sold when compared year-to-date with July of 2002—Gadsden and Marshall counties. Statewide year-to-date average selling price is up 4.0 percent; which is about a 6.9 percent appreciation on an annual basis.

Eleven records were reported for July. Baldwin, Calhoun, and Lee counties all set records for the highest number of homes sold in one month, as did Birmingham, Mobile and Muscle Shoals. Dothan set a record for the highest recorded average selling price, while Huntsville and Montgomery set records in both categories.

Residential construction spending continued to increase in the state in June, climbing 18.2 percent year-to-date over July 2002 to $1.85 billion, as tracked by F.W. Dodge Reports. The state unemployment rate remained unchanged at 5.7 percent, according to the Alabama Department of Industrial Relations.

At the national level, the National Association of REALTORS® (NAR) reported that the number of existing homes sold increased 5.0 percent in July to 6.12 million units on an annualized, seasonally adjusted basis, a new monthly record. Median selling price rose to $182,100, an increase of 12.1 percent compared to July of 2002. Supply decreased slightly to 4.7 months in July from 5.1 months in June. All of this data points to a robust housing sector at the national level.

Residential construction spending at the national level nudged up 0.1 percent, to $443 billion on a seasonally adjusted annual basis, according to the U.S. Census Bureau.

The Consumer Price Index, the most popular gauge of inflation, increased 0.2 percent in July to 183.9 as tracked by the Bureau of Labor Statistics.

The Producer Price Index for Finished Goods, generally considered a leading indicator for inflation, rose 0.1 percent in July to 142.8. According to these metrics, the deflation that many economists feared has not shown itself while inflationary pressures remain in check.

The employment situation worsened for the sixth straight month in July, shedding a total of 44,000 non-farm, payroll jobs. A revision of May and June’s data revealed 40,000 fewer jobs than previously reported.

Unemployment decreased from 6.4 percent in June to 6.2 percent in July, which, according to center director Dr. Leonard Zumpano, was a result of fewer people in the labor force and not an increase in job growth.

“While this data shows continued weakness in the job market, the employment situation is almost always slow to respond to economic upturns. Most economists agree that economic growth in excess of 3.0 percent is needed to create more jobs in the economy,” Zumpano said.

On the bright side, the Commerce Department revised the second quarter GDP up to 3.1 percent while the National Association of Realtors™ is forecasting a 4 percent growth in the third quarter of this year, which could help turn the job market around. The manufacturing sector is also beginning to shown signs of an economic rebound and business investment is on the rise; all signals of a recovery economy, according to Zumpano.

“Last month, we noted, after a very robust May, a few signs of weakness in the Alabama housing sector,” Zumpano said, “but we also warned that one month’s worth of data does not constitute a trend. July is a perfect example of this. The record setting level of home sales, healthy home price appreciation, and tightening supply in July all indicate a very robust market.

“The strong housing market is a culmination of many factors, likely including a response from those potential homeowners that were waiting for the lowest possible interest rates, and jumped into the market as average effective rates dropped to 5.41 percent in July according to the Federal Housing Finance board.”

With interest rates still near historic lows, the improving economy should lead to new job growth and a housing market that is well positioned for another record setting year at both the state and national levels, Zumpano said.

“However, as the economy picks up steam in the face of a looming and possibly record-setting federal budget deficit, mortgage rates will rise,” Zumpano said. “,” he said. “For those families and individuals who have been sitting on the home-buying fence hoping for even lower mortgage interest rates, the time to buy is now.”

The Alabama Real Estate Research and Education Center is part of The University of Alabama’s Culverhouse College of Commerce and Business Administration. The UA business school, founded in 1919, has been recognized repeatedly during the 1990s for offering a high-quality, cost-effective education.

Editor’s note: Chart accompanies release.