Housing Market Gets a Good Start on Year’s Fourth Quarter, According to UA’s Real Estate Research Center

TUSCALOOSA, Ala. – Alabama’s housing market is off to a good start for the fourth quarter, according to figures released by The University of Alabama’s Real Estate Research and Education Center.

Existing home sales rose 2.2 percent from 4,121 to 4,210. “This is our first increase in existing home sales since June,” said Dr. Leonard V. Zumpano, director of the center. There were 206 more existing homes sold in October 2004 than in October 2003. On a year-to-date basis, Alabama’s home sales are still up 15.3 percent from last year at this time.

In October, the average number of days a house was on the market fell from 144 to 132. “This, coupled with the rise in existing home sales, could be a comforting sign that Alabama’s housing market may not quite be out of steam as we approach the end of the year,” Zumpano said.

The number of homes listed in Alabama fell from 25,217 in September to 24,845 in October. At the current rate of sales, that means a 5.9 month supply of homes. This is a slight decrease from September’s 6.1 month supply of homes. Year-to-date, the number of homes listed fell 3.6 percent from 266,687 to 257,269.

The center’s figures show the average selling price in Alabama fell 6.6 percent from $139,570 in September to $130,387 in October. This is the first time average selling price has decreased since July. “A sizable reduction in selling price will help Alabama’s housing affordability increase during the fourth quarter,” Zumpano said, noting that the average selling price is up $4,756 compared to last year at this time, year-to-date.

Regionally, the South had a 3.7 percent increase in existing home sales from 2,670,000 in September to 2,770,000 in October, defying the national downward trend this month. This is a 7.4 percent increase when compared to last October. Also, the South had a 0.65 percent increase in average selling price from $216,500 to $217,900. Also, the average selling price is 10.3 percent higher than in October 2003.

On the national level, according to the National Association of Realtors (NAR), existing home sales decreased by 0.1 percent from 6,760,000 in September to 6,750,000 in October (on an annualized, seasonally-adjusted basis). Existing home sales for the nation are 5.6 percent higher this October than in October 2003. The nation’s average selling price rose 1.4 percent from $236,400 in September to $239,800 in October. This October’s average selling price is 9.9 percent higher than in October 2003.

Within Alabama, the number of existing homes sold increased in 10 of the areas tracked by the research center, decreased in nine locations, and remained unchanged in two areas. This activity accounts for the marginal 2.2 percent increase in existing homes sold for the state in October, Zumpano said. Phenix City surpassed its record of existing home sales during October with 115 sales.

The average selling price increased in five of the areas tracked by the research center and decreased in 16 areas. Two records were broken for average selling price during October. Lee County broke its record with an average selling price of $192,297. Selma broke its record for the year with an average selling price of $105,000.

According to McGraw Hill Construction, new residential construction spending in Alabama is at its lowest so far this year. New residential construction spending decreased 3.6 percent from $316,586,000 in September to $305,270,000 in October.

Although the housing market, in Alabama and at the national level, is still heading toward a record year in 2004, the real question is how long the bond market will continue to tolerate the fast growing federal budget deficit, according to Zumpano.

“Add to this concern over the growing foreign trade deficit and continuing downward pressure on the dollar,” he said. “If foreign governments, the principal buyers of U.S. government securities, lose confidence in America’s fiscal situation, there could be a capital flight out of the U.S. putting upward pressure on interest rates. If this scenario plays out we can look forward to higher mortgage rates as we move into next year and a further deterioration in housing affordability which will, in turn, reduce consumer demand for housing.”

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 during the 1990s for offering a high-quality, cost-effective education.

Alan J. Lloyd, research assistant, contributed to this report.