Alabama Housing Market Poised for Another Strong Year, According to UA’s Real Estate Research and Education Center

TUSCALOOSA, Ala. – Existing home sales in Alabama increased in February 2007 by 14.7 percent to reach 4,069 units sold, according to The University of Alabama’s Real Estate Research and Education Center.

Existing home prices also rose in February to $155,632, an increase of 3.3 percent from January. There were 36,702 homes listed on the market in February, representing a 9.0 month supply of homes in Alabama.

In Baldwin County, however, the housing market experienced a slow year in 2006, and the trend appears to be continuing in 2007. Existing home sales in January and February 2007 totaled 416 units, compared with 559 total units sold in January and February of last year. Condominium sales in Baldwin County through the first two months of 2007 were relatively consistent with condominium sales in January and February of 2006, but Baldwin County condominium prices dramatically decreased.

The average selling price for a Baldwin County condominium in February 2007 was $269,244, much less than the $422,688 average selling price in February 2006.

“The decline in the Baldwin County market at the beginning of the year could be occurring because seasonal factors are affecting the coastal area in Baldwin County more than they would affect other areas in Alabama,” according to O. William Evans, J.D., interim director of the real estate center.

The Birmingham housing market is showing signs of another strong year in 2007. Year-to-date existing home sales in 2007 are up by 7.0 percent from last year, while the average selling price of $195,400 is similar to the average price in the first two months of 2006.

The inventory of homes on the market in Birmingham, however, is noticeably larger compared to last year. There were 11,288 and 10,840 homes on the market in January and February 2007, respectively, while there were only 7,661 and 7,982 homes listed in January and February of last year. There may be many more homes for sale in Birmingham this year than last year, but the Birmingham market appears to be able to handle the growth and ready for another solid year, Evans said.

Huntsville’s market in 2007 has closely resembled its market in 2006, though it appears to be stronger this year. The existing home sales in January and February of 2007 totaled 1,409, which is about 5 percent higher than the existing home sales in the first two months of 2006.

Huntsville home prices have also been higher so far in 2007 than in January and February of 2006. There were about 850 more homes on the market in Huntsville in February 2007 than in February 2006. The Huntsville housing market experienced a solid year last year, and this year looks like it will be the same.

Evans said the Mobile housing market started 2007 much weaker than last year. Existing home sales increased in February 2007 to 364 units, which is 26.5 percent lower than home sales in February of last year. Home prices at $162,050 in February 2007 were 13.1 percent lower than prices in February 2006. There was exactly the same number of houses on the market in Mobile in February 2007 and February 2006. The housing market in Mobile has experienced a slow start to 2007, but there is plenty of time for the market to improve, Evans said.

There have been many more houses listed on the market in Montgomery this year, but existing home sales are lower than last year. There were about 1,000 more homes on the market in February 2007 than in February of last year. Existing home sales for the first two months of 2007, however, were 6 percent lower than in January and February of 2006, despite the increase in the inventory of homes.

Home prices in January and February 2007, averaging $152,715, are relatively consistent with home prices in Montgomery in January and February of last year. Though the existing home sales have been slightly lower so far in 2007, the Montgomery market is still capable of having a strong year in 2007.

Evans said the Tuscaloosa housing market in 2007 has been consistent with the market in 2006. Existing home sales increased in February 2007 to 168 units, about the same as last year. Tuscaloosa home prices averaged $165,863 in February 2007, similar to prices in February 2006. There were 1,689 homes on the market in February in Tuscaloosa, which is 331 more homes than the number listed in February 2006. If the market continues at this rate for the remainder of 2007, this year should be as good as, or better than, last year for the Tuscaloosa housing market.

Statewide, the Alabama housing market in February 2007 appears to be a slightly stronger market than the Alabama market in February 2006. Existing home prices are up from this time last year, and the average number of days a home was on the market in Alabama in February was 128, which is exactly a month less than the average number of days a home was on the market in Alabama in February 2006.

The Alabama unemployment rate was down to 3.3 percent in January 2007, which is 30 basis points lower than the unemployment rate in January 2006. The Alabama economy is expected to remain robust in 2007, and this economic growth, coupled with the increasing labor market, should allow for a strong and sustainable housing market in Alabama for 2007, according to Evans.

At the national level, existing home sales rose in February by 3.9 percent to 6.69 million units. The national median home price dropped to $212,800, a decrease of only 1.3 percent. New home sales fell by 3.9 percent to 848,000 units sold, while new home prices rose by 2.2 percent to $245,500. Housing starts, which usually indicate future market activity, increased by a solid 9.0 percent in February to reach 1.525 million units. National housing starts are, however, 28 percent lower than a year ago.

Long-term mortgage rates are expected to rise to the mid 6 percent range in the next few months and remain there for the rest of 2007. The National Association of Realtors predicts that these rates, along with a strong national labor market, will result in the recovery of the national housing market by this summer.

According to Evans, one stock market analyst for Forbes.com said there will be no housing disaster in 2007 because the housing stocks have increased by 24 percent in the last six months, indicating that the stock market expects the housing market to make a comeback.

“Whether or not the national housing market will be as robust in 2007 as some analysts are predicting, most would agree that the worst of the housing market slump is behind us,” Evans 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.

Editor’s note: Chart accompanies this report