Home Sales Continued to Slow Near End of 2005, According to UA’s Real Estate Center

TUSCALOOSA, Ala. – Existing home sales fell again in November for the fifth consecutive month after peaking in June 2005, according to the Alabama Real Estate Research and Education Center at The University of Alabama. Home prices also have been trending down since August, suggesting the housing market slowed during the last half of the year.

“Part of this downturn reflects the normal seasonal decline in real estate activity that occurs every year during the late fall and winter months,” said Dr. Leonard Zumpano, director of the center. “Tightening loan underwriting, firming mortgage interest rates, and declining housing affordability have also contributed to the softening of the home market.”

The total number of homes listed for sale set a record in November even without the inclusion of Phenix City listings, which were not available for this report. At the current rate of sales, this represents a 5.84 months supply of existing homes, up slightly from October – yet another sign of a slowing housing market.

“Year-to-date we are still slightly ahead of last year’s pace,” Zumpano said. “Both existing home prices and home sales are ahead of last year through November. Whether 2005 sets another record will very much depend on how the December numbers play out, numbers we are still in the process of collecting.”

Within Alabama, existing home sales declined in 12 of the 21 locations tracked by the Alabama Real Estate Research and Education Center, increasing in the remaining nine reporting areas. Home prices fell in 13 locations. Through the first 10 months of 2005, however, total sales are down only in Baldwin and Marshall Counties. Only in Jackson County is selling price lower than last year at this time.

Existing home sales also fell at the national level in November, down 1.7 percent while home prices were down by 1.4 percent from October.

The nationwide median price for an existing home was $215,000 in November, down $3,000 from the previous month. Year to date home sales are down 0.1 percent from November 2004, while median home prices are up 13.2 percent compared to the same time last year. The Pending Home Sales Index, a leading indicator of housing sector performance which is published by the National Association of Realtors®, slowed for the third consecutive month, further evidence the housing market is slowing.

New home sales also fell in November, down a whopping 11.3 percent from October, the largest monthly drop in almost 12 years. “By way of perspective, it should be pointed out that while this is a sizeable decline, new homes sales set a record in October,” Zumpano said. “New home prices also appear to be moderating. They were up just 0.3 percent from November of 2004.

“Although we do not yet have year-end totals, the housing statistics from the last few months indicate that the housing market in both Alabama and the nation has slowed. Part of this decline in the housing sector is seasonal and we expect that we will end the year at or near record levels for home sales and selling price. The U.S. and state economy remain strong as we move into the new year and so long as mortgage rates do not increase dramatically this year, we expect the housing activity to pick up as we move into spring.

“While most economists do not expect 2006 to be a record year for housing it will be a good year by any standard of measurement. The only exceptions would be those markets where price appreciation over the last three years can no longer be sustained. Prices have already moderated along the Gulf, and there is no evidence of a bubble anywhere else in Alabama.”

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.

Editors note: Chart accompanies release