State Housing Inventory Declines for Second Consecutive Month; 2007 Sales Likely to be Third Best on Record, According to UA Real Estate Center

TUSCALOOSA, Ala. – November represents the second consecutive month the state housing inventory has decreased from the previous month, down 1,049 units or 2.40 percent, according to the Alabama Center for Real Estate at The University of Alabama.

“We will continue to closely monitor this very important market indicator as the reduction in excess supply will be critical for the market to regain traction as we enter 2008,” said Grayson Glaze, executive director of the UA center.

Slower home sales during the latter part of the year contributed to the increase in the number of homes on the market, as the current supply of Alabama homes, when compared with November 2006, reflects a significant increase in year-over-year supply by 6,238 units, or 17.16 percent, and a higher than desirable inventory-to-sales ratio of 11.3, Glaze said.

According to Glaze, the inventory of homes for sale at the current sales pace is the inventory-to-sales ratio. An inventory/sales ratio of 11.3 means the supply of homes for sale will deplete in a little more than 11 months at the current sales pace. The 2007 year-to-date average inventory/sales ratio is 8.5, while the average Alabama inventory/sales ratio in 2006 was 6.6, closer to traditional and desired industry levels, Glaze said.

“Barring a recession, this figure should begin to gradually lower as new home starts continue to decrease in the near-term, allowing for the continued absorption of the bloated inventory,” Glaze explained. “The state’s home builders will closely watch this significant market indicator during the first half of 2008 to assist in determining the appropriate time and volume of housing units to bring out of the ground during the upcoming year.

Despite the anticipated recent downward trend in home sales, Alabama will end 2007 at about 56,000 units sold, which represents a modest decline of 6 percent when compared to the high double-digit declines experienced by regional and national counterparts.

“Consistent with the center’s forecast in September of this year, 2007 will also represent the third best year on record for Alabama home sales, in spite of the well-publicized turbulence in the mortgage and credit markets that, along with the constant news of skyrocketing national foreclosures rates, lowered consumer confidence during the third and fourth quarters,” Glaze said.

“To emphasize the resilience of Alabama’s housing market over the entire year from start to finish, one need only point to the fact that despite the market uncertainty – which began in earnest in August – the total 2007 sales will represent only a 7 percent departure from the 2005 peak when 59,922 units were sold,” Glaze said. “The average statewide home sales per year since 2000 are approximately 48,000 units: thus simple math reflects that 2007 sales of 56,000 units easily surpasses historical averages as well.”

Total statewide home sales of 3,768 units in Alabama during November posted a decline of 11.78 percent, representing 503 fewer homes sold when compared to November of last year.

“The double-digit figure should be viewed in proper context as one must also recognize that preceding November home sales represented the second best on record, at 4,271 units for the month,” Glaze said. Consistent with slower consumer demand, the average home selling price in Alabama decreased by 4.87 percent when compared to November 2006 ($154,779 vs. $162,695), according to Glaze.

The individual reporting areas of Huntsville, Mobile, Lee County, Selma and Walker County experienced positive sales trends in November from the prior year. The following associations year-to-date sales through November (with year-to-date percent of growth vs 2006) play a significant role in achieving the much better than national year-ending results.

Glaze said, “Without question, Alabama recently has and will continue to experience periods of market volatility as evidenced by wide monthly movement – both positive and negative – of housing market indicators and consumer uncertainty in response to both credit and equity market turbulence and the unknown future toll of heightened foreclosures.”

The following chart is a three-month moving average that Glaze said represents the best method to gauge today’s Alabama real estate market:

September – November
	2007	2006	% Change
Avg. Home Sales per month	4,029	4,571	dn 11.86%
Avg. Selling Price	$157,517	$160,551	dn 1.89%
Avg. Median Sales Price	$124,833	$126,916	dn 1.64%
Avg. Inventory per month	43,421 units	36,456 units	up 19.11%
Avg. Monthly Supply	10.78 months	7.98 months	up 35.17%
Avg. Days on Market	124 days	120 days	up 3.33%

“There are definite challenges in today’s housing market as some consumers experience their first glimpse of the real estate cycle at work,” Glaze said. “However, home owner opportunities also exist in challenging markets because with excess supply, the consumer has many more products to select from, as well as competitive pricing by sellers. With interest rates that remain historically low, and more rate cuts likely to follow into the first quarter of 2008, you have what the industry describes as a ‘buyer’s market.’ You can be certain that when the excess inventory is successfully reduced over time, increased home prices will indeed follow.”

Glaze said the Alabama real estate market, as it enters the new year, will continue to reflect a period of correction. As demand and pricing continue trending downward in the near-term, the primary question is when to anticipate upward drafts of momentum and market stabilization. This is a period where demand begins to increase, despite declining construction starts, making inroads into the state’s excess housing supply.

“Until inventories begin to significantly decrease, consumers should anticipate more near-term price erosion in many, but not all, local markets,” Glaze said. “Home sales in 2008 will represent a more sustainable pace when compared to recent years where record sales and sales growth were the norm. Total Alabama home sales peaked in 2005 at 59,992 units sold, remained steady in 2006 at 59,616 units, and will end 2007 at approximately 56,000 units. Since 2000, the state has averaged 48,000 units sold per year. The center foresees a near-term trend whereby home sales gravitate toward historic averages rather than recent market peaks.”

The long-term key to generating stability in the housing market, Glaze said, is a correction of the inventory imbalance, improved levels of affordability, and the restoration of consumer confidence in the market place.

“Although these are challenging times for the Alabama real estate industry, it also remains a time for opportunity in each local market, as the state’s underlying economy remains stable, state unemployment remains below the national average, and Alabama consumers’ personal income continues to experience marginal growth,” Glaze said.

The Alabama Center for Real Estate is part of The Culverhouse College of Commerce and Business Administration which was established in 1919. In 1929, the business school became the 38th school to earn admission into the American Association of Collegiate Schools of Business. The excellence of the UA business school has been acknowledged on a national level. The undergraduate program is ranked 29th among public universities by U.S. News and the Culverhouse School of Accountancy is ranked 15th among public universities by U.S. News. The graduate accounting program is ranked 15th and the undergraduate program 14th by Public Accounting Report. The entrepreneurship program is ranked No. 18 by Entrepreneur Magazine.

This report is based on data supplied by the reporting boards/associations of REALTORS® or their Multiple Listing Service. The Alabama Real Estate Center does not guarantee and is in no way responsible for its accuracy. Any market data maintained by the center does not necessarily include information on listings not published at the request of the seller, listings of brokers who are not members of a local board/association or MLS, unlisted properties, rental properties, etc.

The statistics included in this report reflect the residential sales of houses, condominiums, and townhomes. Historical monthly housing statistics are available on the web at Alabama Center for Real Estate’s homepage – www.acre.cba.ua.edu

Editors Note: A chart accompanies this release