State Housing Market Sets Another Record for May, According to UA Center

TUSCALOOSA, Ala. – The Alabama housing market boomed in May with a record setting 3,837 existing, single-family homes sold, according to numbers released by the Alabama Real Estate Research and Education Center at The University of Alabama.

The record represents a 19.5 percent jump over April 2002 and a 12.8 percent increase over May of last year when 3,403 total homes were sold.

Other figures released by the Center for May include:

• Average selling price remained relatively unchanged at $121,462, less than half a percent below April’s figure of $121,971.
• The average number of days on the market increased 3.3 percent to 157 days from 152 days in the previous month.
• The increased sales pace caused a 1.3 month decline in the supply of homes for sale, which was 7.4 months in May, given the current sales pace, as compared to 8.7 months of supply in April.
• Year-to-date, the number of homes sold stood at 14,500 units, up 5.1 percent over May of 2001, also a record setting year.
• Average selling price is up only 1.0 percent year-to-date at $119,036, as compared to $117,854 in May of last year.

Dr. Leonard Zumpano, director of the Center, said nine local records were reported for Alabama in terms of total homes sold and selling price.

“Baldwin County, Birmingham, Dothan, Lee County, Marshall County and Muscle Shoals all reported a record number of homes sold in May,” Zumpano said.

“Of these, Baldwin County reported the largest increase with 470 homes sold. This is 62 percent over the area’s last record of 292 homes sold in March of 2002. In fact, only Gadsden, Mobile and Monroe County, out of the 19 reporting areas, saw a decrease in the number of homes sold. Baldwin County and Calhoun County both set records for the highest average selling price with $219,207 and $118,669, respectively. Birmingham reported its highest median selling price ever at $139,292. The previous record of $133,500 was set just last month.”

In a related economic development, the statewide unemployment rate increased slightly to 5.7 percent in May from 5.6 percent in April, according to the Alabama Department of Industrial Relations. The rural areas were hardest hit by the loss of jobs. Only two metro areas, Montgomery and Tuscaloosa, saw increases in the unemployment rate, with both reporting a 0.2 percent increase.

Residential construction spending was down slightly across the state in May, at $236,804,000 from $244,879,000 in April, according to F.W. Dodge Reports. Year-to-date, residential spending in May was $1,106,883,000, little changed from the $1,109,614,000 level by May of last year. Mortgage rates remain at historical lows across the nation with an effective composite rate of 6.79 percent in May, according to the Federal Housing Finance Board.

Zumpano said the national housing sector did not experience the gains that the Alabama market did, but remained near record levels in May. The National Association of REALTORS® reported that sales of existing, single-family homes fell 0.3 percent in May to a seasonally adjusted annual rate of 5.75 million units.

Median selling price increased only $100 over April with a figure of $154,600 in May. “When compared to May of 2001, however, the strong appreciation in home prices can more easily be seen. The median selling price of an existing, single-family home in May of 2001 was $145,000, 6.6 percent less than the $154,600 figure for May of 2002,” Zumpano said.

The supply of homes tightened to 4.5 months in May at the current sales pace, 0.3 months less than April 2002 and the same as May of last year.

The sales pace of new homes passed the one million unit sales rate for the first time at 1.028 million units in May. The sales pace of new homes has been strong all year with a three month moving average of 965,000 units, higher than the previous one-month record of 909,000 units set in 2001. The inventory of new homes for sale remains tight with only 3.8 months of supply, one of the lowest levels recorded.

Housing starts also took a jump in May with an 11.6 percent increase to 1.733 million units. Single-family homes accounted for most of the increase with 1.389 million of the total 1.733 million units.

In broader economic news, the national unemployment rate fell to 5.8 percent in May from 6.0 percent in April. Consumer confidence slipped 3.5 percent to 106.4 from 110.3, due mainly to a drop in the present situation index.

Despite the drop, the three-month average is still higher than the one-year average, which is still being pulled down by the lows reached after Sept.11, implying that the overall trend in consumer confidence is still upward.

Construction spending in April, the latest figures available, was $871.9 million, up 0.2 percent following a 1.2 percent decline in March. Single-family residential spending remained flat while multi-family spending edged up 4.1 percent.

Zumpano said there is no evidence the boom in the housing sector at either the national or the state level is going to slow significantly in the next couple months. “The employment situation and consumer confidence are likely to remain strong,” he said. “What will begin to change are the historically low interest rates that remain the pillar that the housing market is standing on. The National Association of REALTORS® is forecasting an effective composite rate of around 7.2 percent by the end of the year.

“As interest rates begin to creep up, the resulting crunch on affordability will slow the housing sector to a more sustainable pace. On the bright side, the current boom in housing affordability has allowed many renters who were previously priced out of the housing market to become homeowners. The subsequent purchase of appliances and other household related items by these new homeowners will likely help prop up the overall economy for some time to come.”

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.