Alabama Homes Sales for August Highest on Record, According to UA Center

TUSCALOOSA, Ala. – Existing home sales in Alabama increased 2.9 percent in August to 5,019 units, and for the second straight month Alabama set a new record for the highest recorded number of homes sold in a single month, according to figures released by the Alabama Real Estate Research and Education Center at The University of Alabama.

The average selling price increased 8.9 percent to $133,930. Supply declined to 5.4 months in August from 5.5 months in July. This is the second consecutive month that the supply of existing homes has declined, suggesting a tightening housing market in Alabama.

“Year-to-date home sales in Alabama are up 19.6 percent over the same time last year,” said Dr. Leonard Zumpano, director of the Alabama Real Estate Research and Education Center at The University of Alabama. “In fact, only one area, the Wiregrass, which was formerly classified as Enterprise, has recorded a fewer number of homes sold when compared, year-to-date, with August of 2002. Statewide year-to-date average selling price is up 5.1 percent; which is about a 7.7 percent appreciation on an annual basis.”

Zumpano said a total of 10 new records were reported for August. Calhoun, Marshall and Walker counties set records for the highest number of homes sold in one month, as did Cullman and Dothan. Birmingham set a new record for the highest recorded average selling price, while Huntsville and Montgomery set records in both categories for the second straight month.

Residential construction spending continued to increase in the state in August, climbing 17.3 percent year-to-date over August 2002 to $2.1 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® reported the number of existing homes sold increased 5.5 percent in August to 6.47 million units on an annualized, seasonally adjusted basis, also a new monthly record. Median selling price declined to $177,500, a decrease of 2.3 percent compared to July of 2003, but has increased 12.3 percent since August of 2002. Supply slightly decreased again to 4.6 months in August from 4.7 months in July.

“All of this data points to a healthy housing sector at the national level,” Zumpano said. “The market for new homes also appears strong as the Commerce Department reported that the sale of new homes rose by 3.4 percent in August.”

Residential construction spending at the national level increased slightly by 0.6 percent in July, the latest figures available, to $449 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 0.3 percent in August to 184.5 as tracked by the Bureau of Labor Statistics. The Producer Price Index for Finished Goods, generally considered a leading indicator for inflation, rose 0.4 percent in August to 143.4. Inflationary pressures appear to still be in check, according to these metrics.

The U.S. employment situation worsened for the seventh straight month in August, shedding a total of 93,000 non-farm, payroll jobs. While the data shows continued weakness in the job market, the employment situation is almost always slow to respond to economic upturns, according to Zumpano. On the bright side, the Commerce Department revised the second quarter GDP up to 3.1 percent while the NAR is forecasting a 5.0 percent growth in the third quarter of this year, which should help the job market, he said.

“Most economists agree that economic growth in excess of 3.0 percent is needed to create more jobs in the economy. The manufacturing sector is also beginning to shown signs of an economic rebound and business investment is on the rise, all signals of a recovering economy.”

The record level of home sales, healthy home price appreciation, and tightening supply all point to a very healthy market, according to Zumpano. “Apparently many of the home owners who, just a few months ago, were sitting on the fence waiting for mortgage interest rates to drop were drawn into the market as effective rates dropped to 5.4 percent in July, according to the Federal Housing Finance Board. Rates may be starting to rise again, having increased slightly to 5.6 percent in August, but they are still near historic lows,” he said.

Zumpano said that as the economy picks up steam in the face of a looming and record-setting federal budget deficit and a growing trade imbalance, mortgage rates may continue to rise through the rest of the year.

“The improving economy, however, should lead to new job growth and the housing market is well positioned for another record setting year at both the state and national levels, absent an unexpected spike in mortgage rates,” he said.

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.