Existing Home Sales Set Record in June; Average Sales Price Also Reaches Record, According to UA Real Estate Center

TUSCALOOSA, Ala. – Existing home sales in Alabama set a record in June with 5,905 units sold, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

The previous record was set in June of last year with 5,739 units. The average sales price also set a record at $146,731, up 2.0 percent from the previous month. The average number of days a house for sale was on the market remained relatively unchanged at 130 days while the supply of existing houses for sale at current sales levels fell to a very tight 4.38 months.

Statewide, year-to-date home sales are up 6.3 percent compared to June of 2004, while the average sales price is up 14.7 percent, from the same time last year, at $143,121, according to the UA real estate center. According to center director Dr. Leonard Zumpano, year-to-date figures are generally a better indicator of trends in the housing sector than the relatively volatile month-to-month figures.

“The strong sales pace was once again the result of a strong employment situation and continued falling interest rates,” Zumpano said. The unemployment rate in Alabama remained unchanged in June at 4.4 percent, according to the Alabama Department of Industrial Relations. Interest rates actually fell in June, hitting an average 5.58 percent for a 30-year, fixed rate mortgage with an average 0.6 points, which is down from 5.72 percent for the same loan in May, according to Freddie Mac. Interest rates have been on the rise in recent weeks, however, with the average 30-year, fixed rate mortgage at 5.77 percent, with an average 0.5 point, for the week ending July 28.

On the local level, 15 records were reported. Birmingham, Calhoun County, Dothan, Mobile, Monroe County, Muscle Shoals, Selma, Tuscaloosa and Wiregrass all reported records for the number of homes sold in one month. Birmingham, Calhoun County, Huntsville, Mobile, Montgomery and Walker County all reported record numbers for average selling price.

Only seven of the 21 areas tracked by AREREC reported a decrease in the number of homes sold from the previous month. Year-to-date, however, only two areas have reported a decrease in the number of homes sold, Baldwin County, with a 14.7 percent decrease in the number of homes sold, and Marshall County, with a 4.3 percent drop.

Construction spending figures show no signs of a slow down in the near future for the housing sector in Alabama, Zumpano said. Residential year-to-date construction spending is up 16.7 percent over June 2004 to $2.58 billion across the state, according to McGraw Hill. In fact, every area tracked by McGraw Hill showed a year-to-date increase in spending except Mobile, which showed a 57.0 percent decrease in residential construction spending, as compared 2004. Construction spending tends to be a leading indicator of future home sales.

Home sales set a record at the national level as well. The National Association of REALTORS® (NAR) reported that existing home sales hit 7.33 million units on a seasonally adjusted, annualized basis. The previous record was set in April of this year at 7.18 million units.

The average sale price of an existing home was up 6.3 percent over the previous month at $219,000, the largest annual increase in almost 25 years. This represents a 14.7 percent increase over the same time last year. For the entire U.S., the supply of existing, single-family homes remained unchanged at a tight 4.3 months, given the current sales pace.

New homes sales also set a national record in June. The Commerce Department reported that single-family homes sales rose to a record annual pace of 1.37 million units, up 4 percent from May.

New home prices, however, have fallen for the second consecutive month. In June the median price fell by 5.5 percent to $214,800, down 0.4 percent from the same time last year. New home prices set a record in April when they hit $232,600.

Total housing starts remained flat in June at 2.0 million units on an annualized, seasonally adjusted rate. Despite the unchanged figure, anything over the two million mark is historically very strong, Zumpano said. The NAR forecasts housing starts to finish the year a little over two million units, which would be a record. Single-family housing starts fell 2.5 percent to a 1.667 million units annual pace while multi-family starts rose by 14.2 percent to an annual rate of 337,000 units. Housing starts in the South, however, rose by 11.4 percent in June.

Housing permits, an indicator of future housing market activity, rose 2.4 percent. This increase was slightly higher than most economists had expected.

Just as with the state housing market, the strong home sales are likely a result of a steady employment situation and historically low interest rates. The national employment situation improved slightly in June, which brought the unemployment rate down to 5.0 percent, which remained unchanged in July. While many housing analysts had predicted a slowing market, the housing sector continues to expand. The linchpin of this expansion is the mortgage market where low term rates remained extremely low.

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.