State Housing Market to Face Challenges, Opportunities in 2008

The Alabama housing market will start 2008 with about 43,000 houses up for sale – 8,000 more than last year, says Grayson Glaze, executive director of the Alabama Center for Real Estate at The University of Alabama.

“The primary indicators of where the Alabama housing market is headed are inventory and the number of days a house is on the market,” Glaze said.

Glaze said the Center estimates that it will likely be the third quarter of next year before any significant reductions in inventory begin to materialize. The Center expects the average days on market to increase during the first half of year, and depending on the strength of sales during the peak summer months, may begin to improve late in the year.

The bottom line, Glaze says, is “with inventories at historically high levels in many areas across the state, consumers should anticipate more near-term price erosion as the marketplace will continue to be subject to the laws of supply and demand.”

The “good news” is that home sales in 2008 will be at a more sustainable pace when compared to recent years of record sales and growth. Since 2000, the state has averaged 48,000 units sold per year, and the Center foresees a trend in home sales that move closer to historic averages as opposed to recent market peaks.

And, as for those subprime loans that were all the rage? Look for lending practices with tighter underwriting and reduced product offerings, Glaze says, spurred by the subprime mortgage fallout and rapid rise in foreclosures. The foreclosure increase has added to the number of houses for sale, which added more downward pressure on prices.

“The good news is that interest rates remain historically low, the 30-year mortgage rate recently reached a two-year low, and more rate cuts are likely to continue into the first quarter of 2008,” Glaze says.

The keys to stability in the housing market, Glaze says, “are a correction of the inventory imbalance, improved levels of affordability, and the restoration of consumer confidence in the market place.” Glaze says that while these are challenging times for the Alabama real estate industry, it also is a time for opportunity in the local markets as the state’s economy remains stable, state unemployment remains below the national average, and Alabama consumers’ personal incomes continue to grow.