Home Sales Fall in November but Still on Record Track, According to UA Real Estate Research and Education Center

TUSCALOOSA, Ala. – The number of existing homes sold in Alabama fell 16.7 percent in November to 3,334 units, the third straight month of declines, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

The average selling price remained relatively unchanged at $119,310, while the declining sales pace pushed the supply up 1.1 months to 7.9. The supply of houses is calculated by dividing the total number of homes available for sale by the number of homes sold in the month, which gives the number of months it would take to exhaust the existing housing supply given the current sales pace.

“The sharp decline in home sales is likely the result of two main factors,” said Dr. Leonard Zumpano, director of the UA center. “The natural decline in housing activity experienced in winter, and rising interest rates. Although interest rates have trended down in December, they were on the rise in October and November, when most of the contracts for home sales recorded in November would have been written. In addition to the downward pressure rising interest rates may have had on home sales, the sector historically suffers a slowdown in the months around November through February, and this year has been no exception thus far.”

Zumpano said year-to-date home sales remain up 20.8 percent over November 2002. Home prices have shown moderate appreciation in 2003 with a 4.4 percent increase in average selling price to $124,132 year-to-date 2003. The average number of days on market has fallen 18 days to 148, indicating that, on average, homes have sold faster and for higher prices in 2003 as compared year-to-date to 2002, he said.

Existing home sales declined at the national level as well, according to the center. The number of homes sold fell 4.6 percent to 6.06 million units on a seasonally adjusted, annualized basis, according to the National Association of REALTORS® (NAR). Even with the decline, the home sales pace is near a record high as it is only the fifth time in the series history that home sales have been above the six million mark.

The median home price of $170,900 is down slightly from October but is still 5.9 percent above November of last year.

Looking forward, Zumpano said, the employment situation seems to be improving on the heels of a robust 8.2 percent growth in GDP. At the national level, an estimated net total of 57,000 jobs were created in November according to the Commerce Department. This represents the fourth straight month of gains. In Alabama, the unemployment rate held steady at 5.8 percent, but fell or remained the same in eight of the 11 metro areas tracked by the Alabama Department of Industrial Relations.

Zumpano said there is little fear of inflation in the short term as both the Consumer Price Index and the Producer Price Index fell 0.2 percent and 0.3 percent, respectively.

Housing starts continued to set records in November with 2.07 million units, 1.70 million of which were single family homes, the largest number ever recorded. New home sales fell for the third consecutive month in November to 1.08 million units, or 2.4 percent below October’s figures. Compared to the same time last year, however, new home sales are still up 5.9 percent.

Residential construction spending remains strong at the state level as well. F.W. Dodge Reports indicated that spending was up 19.4 percent to $2.9 billion year-to-date November 2003. The NAR is predicting a cooling trend in 2004 for both home sales and home prices as the improving economy brings long term interest rates back up from historical lows.

Despite the historical downward trend in home sales that comes in the winter months, Zumpano said the robust pace earlier in the year coupled with the still historically strong sales pace should make 2003 a record year.

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.