Alabama’s Housing Market Rebounds in February, According to UA’s Real Estate Research Center

TUSCALOOSA, Ala. – After a slow start in January the housing market in Alabama improved in February, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

The sale of existing single-family homes in the state increased by 12.5 percent from the previous month to 4,165 units sold, according to figures released by the center. The February sales pace is higher than it was at the same time last year, and 2005 was a record-breaking year for the housing market.

The average selling price in Alabama also rose in February to $148,784, ending a five-month decline. The total homes listed in Alabama rose this month to 28,590, representing a 6.86 month supply of existing homes. The average days on the market increased significantly from 130 days to 144 days, so it took almost five months, on average, for homes to sell in this market.

“Even though it is very early in the year, the Alabama housing market in 2006 is ahead of the market at the same time last year,” said Dr. Leonard Zumpano, professor of finance at The University of Alabama and director of the center. Zumpano noted the total of homes sold in the first two months of 2006 was 663 more than the total sold in January and February of 2005.

Also, he said, the 2006 year-to-date average selling price is $3,796 higher than last year’s. The year-to-date average days on the market for this year is 137 compared to last year’s year-to-date of 142, but there are 8,460 more homes listed so far this year in Alabama than there were in 2005.

Thirteen of the 21 areas in Alabama tracked by the Alabama Real Estate Research and Education Center reported an increase in February in existing home sales, while seven reported a decrease, and one, Monroe County, remained the same. The average selling price in February decreased in 10 of the areas and increased in 11 locations, including Lake Martin where the average selling price jumped drastically from $203,630 to $314,250.

“This number must be interpreted with care, however, as only 33 homes sold last month in Lake Martin, so the average sales price can be easily influenced by the sale of a few high priced homes,” Zumpano said.

According to the National Association of Realtors, existing home sales at the national level also increased in February to 6.91 million units sold, up 5.2 percent from January. This is the first increase in home sales at the national level in six months.

The national median home price dropped slightly to $209,000 in February, but this number is still 10.6 percent higher than the median sales price reported for the same month last year. Although the country’s housing inventory rose again to 3.03 million units, the increased sales pace in February resulted in an unchanged 5.3 month supply of homes.

Sales of new single-family homes declined in February by 10.5 percent to 1.08 million units sold, representing the biggest drop in sales in almost nine years. The national median sales price for new homes also dropped in February to $230,400. The inventory of new homes for sale represents a 6.3 month supply of homes. Housing starts, which typically indicate the future housing supply, decreased in February to 2.12 million units.

Rising mortgage interest rates have been blamed for depressing sales during the last half of last year, and they are expected to continue increasing in 2006. The Federal Housing Finance Board reported that the 30-year fixed mortgage rate averaged 6.37 percent in February, compared to 6.32 percent in January. The Federal Reserve’s recent increase in the federal funds rate of a quarter of one percent to 4.75 should put additional upward pressure on mortgage rates, Zumpano said.

“Another area where rising mortgage rates are impacting the market is increased defaults and foreclosures among borrowers who have adjustable rate mortgages,” Zumpano said. The number of foreclosures nationally increased by 13 percent in February to 177,259 properties. RealtyTrac reported that there was one foreclosure in February for every 986 households in the United States. February is the third consecutive month that the foreclosure rate has risen.

Alabama residential construction decreased slightly in February to bring the total to $900,311,000 for the year so far. The Alabama unemployment rate dropped dramatically to 3.6 percent, according to the Alabama Department of Industrial Relations. NAR reported that the national unemployment rate remained the same at 4.8 percent.

Most real estate analysts are still calling for a slow down in the housing market for 2006, Zumpano said. “While this scenario may, in fact, play out, many of these same analysts have been predicting a slower market for the last four years, all of which were record setting as far as home sales and housing appreciation was concerned.

“It is simply too early in the year to see a trend in the data yet. The next few months, as we head into the summer, should be much more revealing about the strength of the residential markets,” Zumpano 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 for offering a high-quality, cost-effective education.

Editors note: Chart accompanies release

Tara Rich, research scholar, contributed to this report.