State Single-Family Housing Sales Bounce Back After June Decline, According to UA Center

TUSCALOOSA, Ala. – Sales of existing, single-family homes bounced back 5.6 percent in July, up from June’s decline of 6.7 percent, according to statistics released by the Alabama Real Estate Research and Education Center at The University of Alabama.

The increase represented a total of 3,779 homes sold in the areas tracked by the Center. The average selling price posted its second consecutive decline to $116,647, 5.8 percent below June’s figure of $123,800. The drop in average sales price came despite a tightening in supply to 7.4 months in July from 7.9 months in June.

“It is the same story we have had all year,” said Dr. Leonard Zumpano, director of the center. “The strong performance of the Alabama housing market can be linked to record low interest rates and strong fundamentals, such as a relatively stable employment situation and moderate home price appreciation.”

Looking at year-to-date figures, which tend to smooth out month-to-month variations, the housing sector appears to be on track for yet another record setting year, according to Zumpano.

The total number of homes sold through July 2002 was up 8.4 percent to 22,331 as compared to 20,600 through July of 2001, another record setting year. Average selling price was relatively unchanged at $119,138 through July 2002 as compared to $119,521 through July 2001.

“The 16,155 unit increase in the total number of homes available for sale year-to-date 2002 over July of 2001 is not as alarming as it first appears as it reflects a statistical anomaly,” Zumpano said. The year-to-date numbers of homes for sale do not include listings for the Birmingham market for January or February 2001.

“If we make the conservative assumption that 6,000 homes were available for sale in Birmingham in both January and February 2001, then the number of homes available for sale in the state would rise to 186,220. This estimate leaves the 190,337 homes available for sale year-to-date July 2002 only 2.23 percent ahead of July 2001.”

The number of homes sold in July increased in 9 of the 18 reporting locations.

According to the center, there is one record to report for the state. Dothan reported 97 homes sold, the greatest number sold in one month for the area since the Center began tracking the housing statistics in 1995.

The last record for the area was set in June 1990 at 90 homes. Montgomery and Tuscaloosa both reported the second greatest number of homes sold in one month at 403 homes sold and 144 homes sold, respectively.

In other housing related news across the state, residential construction spending bounced up almost 10 percent in July to $240.5 million. Year-to-date construction spending is beginning to catch up with last year at $1.565 billion through July 2002. Residential construction spending sat at $1.638 billion through July 2001.

“New home construction has helped meet the strong demand for housing which in turn has kept the upward pressure on home prices from being as strong as it otherwise would have,” Zumpano said.

The unemployment rate in Alabama jumped up to 5.7 percent in July from a revised figure of 4.4 percent in June, according to the Alabama Department of Industrial Relations.

Despite the steep statewide increase, none of the major metro areas tracked by the ADIR saw a large increase in unemployment, Zumpano pointed out, and he noted that the strong metro area employment situation in Alabama has been an important factor in keeping the housing sector rolling along.

The housing market bounced back at the national level as well. According to the National Association of REALTORS®, 5.33 million existing, single-family homes were sold in July on an annualized, seasonally adjusted basis, which represents a 4.5 percent increase from June and a 0.6 percent increase over July of 2001.

The median selling price remained relatively unchanged on a month-to-month basis at 162,800, but is up 7.3 percent from July 2001. In contrast, the median family income for July was reported at $52,206, only 2.1 percent above July of 2001. The supply of homes available for sale fell to 4.6 months in July from 5.3 months in June, which could keep upward pressure on home prices.

Zumpano said some experts have begun to voice concerns that the housing sector in some local markets is “too hot” and the rapid appreciation in home prices may not be sustainable. “Those suggesting a housing bubble point to the fact that increases in home prices have outstripped growth in income in a number of locations,” he said.

“Fortunately there is little evidence of a home price bubble in Alabama as 12 of the 18 in-state locations reported falling prices for the month of July.”

The National Association of REALTORS® is anticipating that the market will moderate in the second half of the year as interest rates creep up from current rock bottom lows of 6.59 percent for a 30-year, fixed rate mortgage to around 7.0 percent, but still finish off with a record setting number of homes sold.

Just as at the state level, new home sales and construction nationally have helped meet the strong demand for home ownership. New home sales broke the one million unit sales pace for the first time in July with 1.017 million homes sold (June’s figure was revised down to 953,000).

Housing starts fell slightly in July to 1.649 million units, still a very strong number, while housing permits hit 1.7 million, also a very strong figure. The NAR is predicting a slowdown to more sustainable levels in new home sales and construction in the second half of the year, leading a moderation in existing home sales.

The national employment situation continued to improve in July with jobless claims falling for the third consecutive month. The unemployment rate inched up to 5.9 percent in June, but is still comfortably above recession levels.

The consumer confidence index fell 4.0 percent in August to 93.5 from 97.4 the previous month. Zumpano said the decline is most likely caused by the turbulent stock market and the attendant accounting scandals. However, he said, the future expectation component fell only modestly and the number of people planning on buying a home in the next six months actually increased.

Despite the positive numbers, there are worries for the housing sector, according to Zumpano. “The decline in consumer confidence could be troubling if it continues and spreads to the long-term outlook,” he said.

“The rapid run-up in housing prices in some of the nation’s largest metro areas is likely not sustainable, and the NAR is predicting that home prices will moderate in the second half of the year as interest rates begin to creep back up to around 7.0 percent. All things considered, however, the housing sector remains very strong and is on track for another record setting 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.