Home Sales Surge in February; Selling Price Jumps, According to UA’s Real Estate Center’s Figures

TUSCALOOSA, Ala. – Sales of existing homes in Alabama surged 14.5 percent to 3,568 units in February, according to figures released by The University of Alabama’s Real Estate Research and Education Center.

In addition, the average selling price increased 4.0 percent to $119,687. The rebound comes after January’s decline in home sales of nearly 20 percent. The average number of days a home was on the market fell slightly to 155 days, down from 160 days.

“All of these statistics suggest that the January numbers were something of an aberration, and the housing market remains tight,” according to Dr. Leonard V. Zumpano, director of the UA center.

So far this year, home sales are up 19.7 percent over 2003’s figures and the average selling price is down 1.1 percent. At the local level, 17 of the 21 reporting areas showed increases in the number of homes sold year-to-date. Baldwin, Jackson and Monroe Counties, along with Cullman, Gadsden, Lake Martin, Montgomery, Muscle Shoals and the Wiregrass all reported increases greater than 25 percent in the number of homes sold compared with 2003.

Year-to-date spending on residential construction is down 43.9 percent across the state, according to a McGraw Hill Construction report. At the local level, the areas showing declines in spending were Birmingham, Decatur, Dothan and Florence. Anniston, Huntsville, Montgomery and Tuscaloosa all reported a greater than 9 percent increase in residential construction spending.

At the national level, existing, single family home sales increased 2.0 percent to 6.1 million units, according to the National Association of REALTORS® (NAR). The average selling price fell slightly but is up 5.7 percent over the same time last year at $168,100. Supply increased slightly, but is still at a very tight 4.6 months, Zumpano said.

Housing starts fell 4.0 percent in February to 1.86 million units, according to the center.

“Despite being the second straight month of declines, the new home market remains quite strong by historical standards,” Zumpano said. “As a reference, housing starts in 2003 were 1.85 million units and totaled 1.70 million units in 2002. New home sales were up 8.5 percent in February to 1.16 million units and the supply of new homes for sale fell to a very tight 3.8 months. The recent decline in housing starts could bring the new home sales figure down in the coming months, although NAR is forecasting increases in starts over the next three months.”

Zumpano noted the employment situation improved marginally in January. A total of 21,000 payroll jobs were added while the unemployment rate held steady at 5.6 percent. The NAR is forecasting GDP growth in excess of 4.0 percent, which should help buoy the labor market, he said. Zumpano said the Consumer Confidence Index fell 9.4 percent to 87.3 in February, likely in response to sluggish job growth and rising fuel costs.

According to Freddie Mac’s Primary Mortgage Market Survey, the average interest rate on 30-year, fixed rate mortgages fell to 5.64 percent from 5.74 percent in February as investors have flocked to bonds, pushing market rates down. Fees and points remained unchanged at 0.7. Zumpano said inflation is still not an immediate concern, as measured by the Consumer Price Index and the core personal consumption expenditure deflator. The CPI was up 0.3 percent February, still below worrisome inflationary levels.

Zumpano pointed out that energy costs are continuing to rise, even as the strong winter demand for heating fuel eases and before the high travel summer months. “Rising gasoline prices not only are inflationary, but they will take a chunk out of consumer income and, consequently, have a dampening affect on future consumer spending,” he said.

“Continued low mortgage interest rates have once again kept home sales in record setting territory,” Zumpano said. “A recovering economy will introduce more inflationary pressure in the coming months, which will likely edge mortgage rates up. Moderately rising interest rates should slow home sales a bit in the months to come, but at this point, the sector is on track for yet another record setting year.”

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 for offering a high-quality, cost-effective education.