Housing Market Sending More Mixed Signals, According to UA’s Real Estate Research and Education Center

TUSCALOOSA, Ala. – After a solid showing in the first quarter, existing home sales in the state fell in April, down 5.3 percent from the previous month, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

“This is not a surprising statistic given that existing homes sales were up a very strong 26 percent in March,” said Dr. Leonard Zumpano, director of the center. “Year to date home sales are up 3.2 percent from April a year ago. So far, no real trend has emerged as to the future direction of home sales in the state as home sales have been volatile in both directions since January.”

Home prices, however, continue to increase, up an impressive 6.3 percent from March. This is the third consecutive increase this year. Year to date home prices in Alabama are 5.5 percent higher than at the same time last year.

At the same time, the supply of homes is also rising, up 6.3 percent from last month and up a staggering 34 percent from a year ago April. This represents a 6.5 month inventory of unsold homes at the current sales pace, Zumpano said.

“Somewhat surprisingly, average days on the market has remained pretty stable and actually declined compared to the first four months of last year,” he said.

That the number of homes listed has increased consecutively since December of last year suggests some degree of speculation in the market, Zumpano said.

“Buyers who purchased properties last year are now trying to flip them for a quick profit. Fear of rising mortgage rates may also be encouraging investors to put their property on the market. In Baldwin County, for example, the total number of homes listed for sale as of April 2006 is 188 percent higher than the same time last year.”

Within Alabama, home sales during April increased in 10 of the 21 markets tracked by the Alabama Real Estate Research and Education Center, declining in the other 11 locations.

Home prices rose in 14 areas, falling only in seven local markets last month, while the supply of existing homes increased in 15 locations. Compared to April of last year, home prices rose in 16 locations, falling in only five of the areas monitored by AREREC.

On a year-to-date basis, most locations reported higher prices than during the same period last year; only four areas, Baldwin County, Monroe County, Walker County, and Phenix City have lower prices. So far this year, the Alabama market remains strong with only a few locations exhibiting signs of a housing slowdown.

At the national level, the April statistics offer something of a mixed picture. Existing home sales fell slightly last month by 2.0 percent on seasonally adjusted annual base and were 5.7 percent lower than April 2005. The average price of an existing home at the national level rose by 3.1 percent in April to $269,000, while the median price rose by 4.2 percent to $223,000.

The total supply of housing rose by 5.8 percent during April to 3.38 million existing housing units, a six-month supply of homes at the current sales pace. Freddie Mac reported that the national average loan commitment rate for 30 year fixed-rate mortgages was 6.51 percent, up almost 20 basis points from March.

Mortgage rates have finally begun rising after two years of short-term rate increases by the Federal Reserve. The rate on 30-year mortgage loans rose to 6.60 percent so far this month, the highest rate in almost four years.

Possibly as a consequence of rising mortgage rates, housing starts fell by 7.4 percent in April while building permits, a good measure of future construction activity, fell 5.4 percent during the same period.

In contrast, the sale of new homes rose again in April to the fastest sales pace so far this year. The Commerce Department reported that the sale of new, single-family homes increased by 4.9 percent last month to a seasonally adjusted annual rate of 1.20 million units, the highest rate since December 2005.

“Most forecasts still predict a slowing housing market,” Zumpano said. “The evidence so far suggests that although there are indications that the market is slowing, there is little evidence to suggest a significant contraction is taking place.

“It appears that the market still lacks direction. Until the market stabilizes it will be characterized by a period of somewhat greater price volatility and a slower sales pace compared to the last few years.”

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.

Editor’s note: Chart accompanies release