Alabama Housing Market Straddling Fence, According to UA Center’s Stats

TUSCALOOSA, Al. – The Alabama housing market is straddling the fence between slowdown and record sales, according to the Alabama Real Estate Research and Education Center.

The number of homes sold in October, 3,238, is relatively unchanged from September’s 3,211 homes sold.

“Although home sales did slow a bit in September, both the October and September sales pace is historically very strong,” said Dr. Leonard Zumpano, director of the center. “The average number of days on the market fell 7.7 percent to 144 days while supply fell to 8.5 months from 8.6 months. With a tighter supply of homes and faster selling times, one would expect to see an increase in average selling price. In fact, the average selling price for homes in Alabama fell 3.7 percent to $116,970.”

Zumpano said the decline in home sales in September coupled with the conflicting data in October could signal a trend towards declining housing sector activity.

“This is not inconsistent with the normal seasonal slowdown that occurs during the late fall and early winter months,” he said.

Exactly half of the areas tracked by AREREC reported a decline in the number of homes sold while the other half reported an increase. Consequently, there was little change in the number of homes sold across the state. Marshall County set a local record with 102 homes sold in October. The previous high for Marshall County was 98 homes sold in August of this year. Just under half of the areas reported an increase in average selling price. Both Huntsville and Lee County set records at $139,695 and $168,700, respectively.

Although the housing market may be cooling off, it is by no means weak on an annualized basis, according to Zumpano.

Year-to-date, 32,962 homes have been sold in the 20 areas tracked by AREREC. This compares to 29,618 homes sold by Oct. 2001. There has been little home price appreciation across most areas of the state. The year-to-date average selling price is up only 0.7 percent for the state as a whole. Fourteen of the 20 areas experienced home price appreciation in 2002 with Baldwin County posting the highest gain at 10 percent.

Six areas have actually experienced a decline in home prices. Using an extreme example, Jackson County has seen its average selling price fall 16 percent so far this year.

“There are some positive signs on the horizon for the housing market in Alabama,” Zumpano said. “The unemployment rate in Alabama fell slightly in October to 5.6 percent from 5.7 percent the month before, and construction permits are up all across the state.” Residential permits jumped 38.7 percent to $287,578,000 in October, according to F.W. Dodge Reports. Construction figures are known for volatility and frequent revisions.

“Unfortunately, October 2001’s figures are not available, so a year over year comparison is not meaningful,” according to Zumpano. “We can look for trends, however, by taking a three-month moving average and comparing the most recent month’s data to the average. If the most recent month’s figure is above the three-month average, it typically means that the data is moving in an upward direction, and vice versa. This is indeed the case with the statewide construction permits.”

October’s figure of $287,578,000 is well above the three-month average of $244,420,330. Moreover, the three-month moving average has increased for each of the last four months, further indicating an upward trend in construction spending. Specific areas showing strong upward trends in October include Decatur, Dothan, Florence, Gadsden, Mobile, Montgomery and Tuscaloosa.

There is mixed news for the near term housing sector at the national level. Although housing starts fell 13 percent to 1.6 million units, it appears to be mostly weather related as the backlog of unused building permits rose substantially in October. Newly issued permits were up to 1.76 million units on an annualized, seasonally adjusted basis. The National Association of Home Builders predicts 1.68 million home starts by the end of 2002, a very strong year for housing starts, Zumpano said.

At the other end of the spectrum, the Consumer Confidence Index fell to 79.4 in October, its lowest level since November 1993. “Especially problematic for the housing sector, respondents reported that jobs are getting harder to find and, accordingly, fewer people are planning to buy big-ticket items like homes and automobiles in the next six months. Also, the national unemployment rate crept up to 5.7 percent from 5.6 percent,” Zumapno said.

Another significant indicator, payroll employment, decreased by 5,000 jobs in October, the second consecutive monthly decline in this economic statistic. Even so, the worst appears to be over for the labor market. The economy grew at a preliminary 3.1 percent in the third quarter. The economy is expected to continue growing, albeit at a slower rate, during the fourth quarter, which should continue to fuel for job and income growth.

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 during the 1990s for offering a high-quality, cost-effective education.