Sales of Existing Homes in Alabama Increase in April, According to UA Center’s Stats

TUSCALOOSA, Ala. – Sales of existing homes in Alabama increased 1.5 percent in April, according to the Alabama Real Estate Research and Education Center at The University of Alabama. The increase was far less dramatic than the 60 percent increase in March, but another increase nonetheless.

The average selling price was virtually unchanged at $125,170, the center reported, while the average number of days a house was on the market was 153, up from 147 days in March. Supply fell to only 4.47 months at the current sales pace, suggesting a very tight housing market, according to Dr. Leonard Zumpano, director of the UA center.

Year-to-date 2004 home sales are up 21.8 percent over April 2003 while average selling price is up only 0.7 percent. For the sake of accuracy, Zumpano said, it should be noted that Jackson County did not report this month because it is now part of the Huntsville multi-list reporting system. Jackson County numbers will be included in July, but for now, some or all of Jackson’s sales may have been reported in Huntsville’s numbers.

Statewide, residential construction spending is up markedly, at 47.2 percent year-to-date at $1.5 billion, according to McGraw-Hill Construction figures.

“In fact, only the Dothan area reported a decline in residential construction spending, but even here the drop in spending activity was less than one percent,” Zumpano said. “Anniston, Huntsville, Mobile, Montgomery and Tuscaloosa all reported gains of more than 50 percent in spending.”

The state unemployment rate, a key determinant in house sales, fell slightly to 5.8 percent in April from 5.9 percent in March. Unemployment fell or stayed the same in every major metro area accept Gadsden, which reported a 0.4 percent increase to 6.4 April.

The National Association of Realtors reported that existing homes sales on the national level increased 2.5 percent to a seasonally adjusted annual rate of 6.64 million units in April, the second highest sales pace on record. Sales are up 15.1 percent from the same time last year. Median sales price was up 1.2 percent for the month and 7.3 percent for the 12 month period.

Regionally, the Northeast experienced the largest price increase in the nation with home prices jumping 19.3 percent in April to a median price of $214,100. The West reported the second highest gain at 11.5 percent. The Midwest saw a 5.3 percent rise while the South reported an increase of 7.0 percent. The supply of homes increased slightly to 4.6 months in April from 4.4 months in May, still a very tight market.

“The recent rise in mortgage interest rates may have pushed many potential homebuyers into the market that were either on the fence or trying to time the market to get the lowest possible interest rate,” Zumpano said. “Rising rates would also serve as an incentive for buyers and sellers to complete their transactions a little faster than usual before interest rates move any higher.”

Housing starts were down in 2.1 percent in April to 1.97 million units (seasonally adjusted, annualized) according to the Commerce Department. Despite the decrease, April’s figure is quite strong from a historical perspective, according to Zumpano. As a comparison, the April figure is still 20.3 percent above April of 2003, which was a record setting year. Building permits, on the other hand, were up 1.2 percent to 2.0 million, indicating builders’ optimism for the coming months.

The employment situation continued to improve in April with the gain of 288,000 non-farm payroll jobs. The previous two months’ data were revised upward by 103,000. The unemployment rate fell to 5.6 percent from 5.7 percent the previous month. Average hourly earnings are up only 2.2 percent from one year ago, suggesting that wage inflation is not an immediate concern.

The Consumer Confidence Index strengthened in April to 92.9, up from 88.3 in March. “The expanding labor market likely had a lot to do with the boost in confidence as did the receipt to tax refunds,” Zumpano said.

The Consumer Price Index rose 0.2 percent in April and is up 2.3 percent over the last 12 months. Core prices (excluding the volatile energy and food categories) are up 0.3 percent for the month and 1.8 percent over the last 12 months. Overall inflationary pressure eased a bit in April from the previous month, but price increases have become more widespread and not just confined to energy prices.

Given the strong economic data, a ballooning budget deficit, and building inflationary pressure, many economists are expecting the Federal Reserve to raise interest rates at its meeting this month, eventually setting the target rate to around 1.75 percent by the end of the year, according to Zumpano.

“Although the rise in rates may actually be driving home sales in the near term, the increased borrowing costs should have a moderating effect on the housing sector in the coming months,” 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.