State Housing Market Shows Signs of Slowing

TUSCALOOSA, Ala. ‚ As the year ended, the state’s housing market showed definite signs of slowing down, according to the Alabama Real Estate Research and Education Center at The University of Alabama’s Culverhouse College of Commerce and Business Administration. Statewide, the average selling price for existing homes fell by almost $6,000 in the month of December, and the number of homes sold fell by 3.6 percent from the previous month. Even so, 1999 was still a banner year for housing in Alabama, according to Dr. Leonard Zumpano, the Center’s director.

In 1999, existing home sales were up 5 ‡ percent over 1998, and home prices finished the year up 3.26 percent. “Interestingly, average days on the market actually fell by 7 days in December,” Zumpano said. “For all of 1999, selling time increased by 9 days, a very nominal increase at best. This data suggests that while the housing markets may be slowing, they remain very robust and active.”

Within Alabama the number of homes sold in December declined in 13 of the 19 reporting locations. Sales were particularly strong, however, in Baldwin County and Birmingham. The same kind of monthly variation in selling price was reported throughout the state, with home prices declining in 13 locations and increasing in 6 areas.

For the year, however, prices were up in every location except Monroe County. Time on the market showed even more volatility in December, increasing in half the reporting areas and declining everywhere else.

“When looking at the year-end numbers, it is truly remarkable to see just how strong the housing market’s performance has been in the face of three consecutive interest rate increases by the Federal Reserve,” Zumpano said. “A large part of the explanation lies with the very strong economy and the substantial increase in consumer net worth that has resulted from the continuing bull market in stocks. The housing markets have also benefited from the ready availability of mortgage funds and growing acceptance of adjustable rate mortgages by consumers, which has helped to keep home financing costs affordable.”

With the Federal Reserve’s fourth interest rate increase in February and expectations of additional rate hikes in the near term, further moderation in the housing market activity should be expected in 2000, Zumpano said. “So long as the Fed’s actions only slow economic growth and the economy remains strong, a major, near-term shakeout in the housing sector remains unlikely,” he said.