2005 Another Record Year for Housing in Alabama, According to UA’s Alabama Real Estate Center

TUSCALOOSA, Ala. – Despite concerns to the contrary, 2005 was another record year for housing in Alabama and the U.S., according to the Alabama Real Estate Research and Education Center at The University of Alabama.

Statewide, both the number of existing homes sold and average selling price set records last year, according to the real estate center. A total of 59,922 existing homes were sold in Alabama in 2005, a solid 10.03 percent increase from the total amount sold in 2004. The average selling price for 2005 was $148,184, up 13.58 percent from the average in 2004.

For the year the total supply of existing homes offered for sale in Alabama rose slightly from 2004, while average days on the market declined to an average of 130 days, a little more than four months.

Existing home sales rose during December, up just less than 2 percent from November. Home prices, however, continued their slide down for the fourth consecutive month to $150,312.

“Some of this decline can be attributed to seasonal factors, but the numbers do point to a slowing housing market as we enter 2006,” according to Dr. Leonard Zumpano, director of the UA center.

Existing home sales and average selling price both increased in 11 of the 21 areas tracked by the Alabama Real Estate Research and Education Center, while the 10 remaining locations reported a decrease. All but two areas, Baldwin and Gadsden, reported an increase in total homes sold for the year 2005.

Jackson County was the only location that did not see an increase in average selling price for the year. The year 2005 was a record-breaking year for existing homes sold in 17 of the 21 areas.

At the national level, 2005 was also a record year for the housing market. Annual existing home sales totaled more than seven million units, up 4.2 percent from 2004. This is the fifth consecutive year that existing home sales set a record. Median prices for existing homes also set a record, up 12.7 percent from 2004, the largest price increase since 1979.

In December, existing home sales fell for the third consecutive month. A total of 6.60 million homes were sold nationally on a seasonally adjusted, annualized rate, according to the National Association of Realtors® (NAR), representing a 5.7 percent decrease from November. Prices remained relatively strong with the national median existing home sales price standing at $211,000 at the end of December.

In contrast to the December decline in existing homes sold, nationally, new home sales increased by 2.9 percent to 1.27 million units sold. The number of new homes sold rose by 1.8 percent for all of 2005, resulting in a fifth consecutive record-breaking year. The inventory of new homes for sale continues to rise and now stands at a 4.9 month supply. The national median sales price for new homes was $237,300, representing a rise of 7.4 percent in 2005.

Housing starts, an indicator of the future direction of new home sales, declined by 9.0 percent to 1.93 million units (seasonally adjusted, annualized) in December.

According to the Federal Housing Finance Board, the 30-year fixed mortgage rate averaged 6.35 percent in December. The rate on 30-year fixed mortgages steadily declined during December, resulting in a rate of 6.22 percent during the last week of the month. The Consumer Price Index fell by only 0.1 percent in December.

The number of homes sold in 2005 broke records in the state of Alabama and nationally, despite many forecasts that 2005 would not be as strong as 2004.

“As we enter into 2006, Alabama’s real estate market seems healthy and poised for another good, if not record, year,” Zumpano said. The only exception may be Baldwin County, where the number of homes sold and selling prices continue to decline. These numbers suggest the prices in the Baldwin County area are returning to more realistic and sustainable levels, Zumpano said.

Nationally, with existing home sales trending down and new home sales rising in 2005, predicting where the housing market will be going in 2006 is difficult, according to Zumpano. “Economists for the National Association of Realtors claim that the year 2006 will be one of normalization,” Zumpano said.

“They predict that a slight decline in home sales, a more moderate rate of price appreciation, and an increase in housing inventory will bring supply and demand into better balance,” Zumpano said. “The most recent and, hopefully last, increase in interest rates by the Federal Reserve may help dampen demand for housing in 2006, but mortgage interest rates should remain at attractive levels throughout the new year.”

Editors note: Chart accompanies release

Tara Rich, research scholar, contributed to this report.