State’s 2007 Real Estate Sales Third Best on Record; Housing Inventory Drops Third Straight Month, According to UA Center

TUSCALOOSA, Ala. – Despite the recent and anticipated downward trend in Alabama home sales, which continued in December, Alabama ended 2007 with 57,083 units sold, a modest year-over-year decline of 5 percent when compared to the high double-digit declines experienced by its regional and national counterparts, according to the Alabama Center for Real Estate at The University of Alabama.

Consistent with the center’s September forecast, 2007 was the third best year on record for Alabama home sales despite the turbulence in the mortgage and credit markets which, along with the increasing national foreclosures rate, lowered Alabama consumer confidence during the third and fourth quarters.

December marked the third consecutive month the state housing inventory decreased from the previous month, down 1,512 units or 3.51 percent. The statewide number of units for sale peaked in July at 44,921 units and finished 2007 with an inventory of 41,604 units, representing a positive absorption of 7.38 percent or 3,317 units during the last six months of the year.

“However,” said Grayson M. Glaze, executive director of the real estate center, “one must balance this positive development with the insight that the current housing inventory still remains 19.17 percent higher than last December when inventory represented 34,912 units. The center will continue to closely monitor this very important market indicator as the reduction in excess supply will be critical for the market to regain positive traction during 2008.”

Glaze said a key market indicator to watch is the inventory-to-sales ratio.

“The inventory of homes for sale at the current sales pace is the inventory-to-sales ratio,” Glaze said. “The December ratio was 11.1 months which indicates that at the current sales pace, the existing supply of homes would be depleted in 11.1 months. This is considered unhealthy and significantly higher than traditional and desired industry levels of approximately six months.

“This represents year-over-year increase of 41.77 percent when compared to the December 2006 I/S ratio that equaled 7.9 months. To further illustrate this disparity from a historic perspective, the five-year I/S ratio average from 2002 to 2006 was 6.5 months. Barring a recession, this important but often overlooked indicator should continue to gradually decline, albeit at a slower than desired pace during the first half of 2008 as new home starts continue to decrease in the near-term allowing for the continued absorption of the swollen inventory.

“The center projects that it will likely be toward the second half of 2008 before the statewide I/S returns to desired levels. Real estate professionals and consumers alike simply have to follow the I/S because its return to normal levels will indicate that the real estate market is poised to move beyond the current market correction.”

As the real estate community expected, total statewide home sales during December (3,702) declined by 17.59 percent representing 790 fewer homes sold when compared to December of last year.

“The double-digit figure should be viewed in proper context,” Glaze said. “One must recognize that preceding December home sales represented the second best on record at 4,492 units for the month. Because of slower consumer demand, the average selling price in Alabama decreased by 3.97 percent when compared to December 2006 ($148,279 vs. $154,417). The average number of days that a home was on the market in December 2007 was 130, which represent an increase of 8.33 percent from the 120 days from listing to sale in December 2006.”

Below is a three-month moving average that Glaze said perhaps represents the most appropriate snapshot of Alabama’s real estate market:

October – December

	2007	2006	% Change
Avg. Home Sales per month	3,874	4,494	down 13.77%
Avg. Selling Price	$150,967	$159,332	down 5.25%
Avg. Median Sales Price	$127,558	$127,882	down .25%
Avg. Inventory per month	42,950 units	36,141 units	up 18.84%
Avg. Monthly Supply	11.1 months	8.1 months	up 37.04%
Avg. Days on Market	125 days	121 days	up 3.31%

 

Glaze said the Tuscaloosa area real estate market performed best among the major markets with 12.69 percent in year-over-year sales growth. Among mid-sized markets, Muscle Shoals let the way with 4.62 percent in sales growth with Gadsden right behind with 2.24 percent of positive growth. Walker County represented the only rural area with positive sales growth in 2007 as it reported strong growth of 21.69 percent.

Huntsville experienced the highest increase in average selling price at 7.50 percent for major markets; Phenix City for mid-size at 11.10 percent and Jackson County for rural area at 17.96 percent year-over-year sales price growth.

As it enters the new year, Glaze said the Alabama real estate market will continue to reflect a period of correction as demand will likely remain softer than normal in the near-term.

“The primary question is when to anticipate upward drafts of momentum, a period when pent-up demand is released and begins to increase despite declining construction starts, making inroads into the state’s excess housing supply,” Glaze said.

“Until inventories begin to significantly decrease, consumers should anticipate more near-term price corrections in many, but not all, local markets. Home sales in 2008 will represent a more sustainable pace when compared to recent years where record sales and sales growth were the norm and are projected to fall short of 2007 results.”

Glaze said some consumers are getting their first glimpse of the real estate cycle at work.

“This is a good time for Alabama consumers when hearing the ‘R-word’ to think re-evaluate instead of recession,” Glaze said. Potential homebuyers and investors will continue to have more product to select from, Glaze said, as well as more competitive pricing among sellers and more significant reductions in interest rates that are already historically low.

“Alabama consumers can be certain that when the excess inventory is successfully reduced, increased home selling prices will indeed follow,” Glaze said.

The long-term key in 2008 to generating stability in the housing market is the continued correction of the inventory imbalance, the continued improvement in the levels of housing affordability, and the restoration of consumer confidence in the market place, Glaze said. “Real estate is local, and there is no one better to assist with explaining your local market conditions than a licensed real estate professional,” he said.

The Alabama Real Estate Center is part of The Culverhouse College of Commerce and Business Administration which was established in 1919. In 1929, the business school became the 38th school to earn admission into the American Association of Collegiate Schools of Business.

The excellence of the UA business school has been acknowledged on a national level. The undergraduate program is ranked 29th among public universities by U.S. News, and the Culverhouse School of Accountancy is ranked 15th among public universities by U.S. News. The graduate accounting program is ranked 15th and the undergraduate program 14th by Public Accounting Report. The entrepreneurship program is ranked No. 18 by Entrepreneur Magazine.

This report is based on data supplied by the reporting boards/associations of REALTORS® or their Multiple Listing Service. The Alabama Real Estate Center does not guarantee and is in no way responsible for its accuracy. Any market data maintained by the center does not necessarily include information on listings not published at the request of the seller, listings of brokers who are not members of a local board/association or MLS, unlisted properties, rental properties, etc.

The statistics included in this report reflect the residential sales of houses, condominiums, and townhomes. Historical monthly housing statistics are available on the web at Alabama Center for Real Estate’s homepage – www.acre.cba.ua.edu.

Note: To view a chart for this release, click here.