State’s Housing Market Starts Strong During First Quarter of 2006, According to UA’s Real Estate Research Center

TUSCALOOSA, Ala. – Existing home sales in Alabama were up a whopping 26.34 percent in March, according to the Alabama Real Estate Research and Education Center at The University of Alabama. This is the second straight increase in home sales (sales rose 12.5 percent in February) after five previous months of declining home sales.

“While experts continue to predict that residential real estate markets are slowing, it does not appear to be happening here,” said Dr. Leonard V. Zumpano, director of the center.

The average selling price in Alabama also rose, to $151,579 in March from February’s average price of $148,784. The total homes listed for sale in the state increased in March to 30,278, which represents a 5.75 month supply of homes. The average days a house was on the market in Alabama declined from February by 20 days to 124 days in March.

The year-to-date figures for Alabama indicate that the housing market is ahead of last year at the same time and on a year-to-date basis, Zumpano said. The year-to-date figure for total homes sold in 2006 is 13,129 units, which is 934 more homes sold than during the first three months of 2005.

The year-to-date average selling price this year is $5,635 higher than the year-to-date average price of last year. The average time on the market is also lower year-to-date compared to last year. The supply of homes, however, has risen dramatically in 2006. There have been 14,921 more homes listed in the first three months of 2006 than in the first three months of 2005.

“Despite the increase in supply, prices continued to rise, indicating strong demand for existing housing,” Zumpano noted.

Eighteen of the 21 areas in Alabama tracked by the Alabama Real Estate Research and Education Center reported increased home sales in March, with only three locations reporting slight declines in home sales. Eleven of the 21 areas reported an increase in the average selling price this month, and 10 reported a decrease.

In contrast to Alabama, existing home sales at the national level increased only marginally in March, up 0.3 percent to 6.92 million units. Although the increase is slight, this is the second consecutive month that existing home sales have increased nationally after a six month consecutive decline, Zumpano said.

The national median home price increased to $218,000 in March, which is 7.4 percent higher than the median sales price registered in March of last year. The National Association of Realtors reported, somewhat surprisingly, according to Zumpano, that March saw the biggest increase on record in the inventory of homes for sale, rising by 209,000 to 3.194 million units, a 5.5 month supply at the March sales pace.

The new home market rebounded from February when sales were down 10.5 percent. New single-family home sales increased in March by 13.8 percent to 1.23 million units after a two-month consecutive decline. The national median new home price declined in March to $224,200, which represents a total drop of 2.0 percent since March of 2005. The inventory of new homes for sale also increased this month to a 5.5 month supply of homes.

Housing starts, sometimes an indicator of future housing market activity, decreased again in March to 1.96 million units, the second straight decline. “In this case declining housing starts may simply reflect builders’ attempts to reduce existing inventories,” Zumpano said.

The Federal Housing Finance Board reported the effective rate on 30-year fixed mortgages rose in March to an average of 6.49 percent. Although mortgage rates have been rising slowly over the past few months, they are still extremely attractive from a historical perspective, Zumpano said.

Residential construction in Alabama increased in March, bringing the total to $1.4 billion for 2006. According to the Alabama Department of Industrial Relations, the Alabama unemployment rate rose in March to 4.1 percent, which is still well below the national unemployment rate of 4.7 percent.

Despite the dramatic rise in the supply of homes, both in Alabama and nationally, the housing markets still appear to be expanding. Low unemployment, attractive interest rates, and a very robust economy (GDP increased by a very strong 4.8 percent during the first quarter) continue to drive the housing markets, according to Zumpano.

“This is especially true in states like Alabama, where housing still remains very affordable compared to some other parts of the country. The only trouble spot is the price of gasoline and oil, which could adversely affect future economic growth should it continue to rise,” Zumpano said.

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 for offering a high-quality, cost-effective education.

Editors note: Chart accompanies release

Tara Rich, research scholar, contributed to this report.