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Real estate market still ‘very difficult’ for Alabama homebuyers

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A home for sale near Birmingham displays a 'under contract' sign in addition to its for sale sign.

Jeff Stith is ready to sell his house in Helena.

He and his wife Kristie have lived at a home on Secretariat Drive for the last 14 years as their six children grew to adulthood. Now, the couple are looking to sell their 3,200-square-foot home and downsize.

To a camper.

“We’ll probably live in it for a year until the price of materials comes down so we can afford to rebuild,” he said.

The house went on the market late last month, and has already had two open houses. At the same time, two homes in his neighborhood have already sold.

“It’s crazy,” he said.

Home sales in Alabama are white hot, and have been for more than a year, as the lingering economic effects of the pandemic have mixed with an already tight market to produce the current climate.

According to the Alabama Center for Real Estate (ACRE) at the University of Alabama, the statewide median sales price in February for residential housing was $225,568, an increase of 18.3 percent over a year earlier.

In February, demand was up 3 percent year-over-year, while supply fell by 26 percent. Monthly listings were down 25.6 percent from the previous year.

That means that at the current sales pace, all the active inventory on the market statewide would sell in 1.4 months. Analysts feel buyers and sellers have roughly equal bargaining power with six months of supply.

Homes sold in February averaged 48 days on the market, which is 19 days faster than one year ago.

“It’s a very difficult market for buyers,” Stuart Norton, an analyst and associate director with ACRE said.

“And I don’t see that changing drastically over the short-term going forward. But we are probably going to see some price moderation.”

Those conditions are reflected somewhat in the Stith home, which appraised for $216,00 a few years ago. Now, it’s valued at almost $400,000.

The story is similar for David Crauswell, who lives in a rural home near Jasper but is looking to move closer to town for convenience and for better Internet access.

The last time he thought about selling was in 2013, he said. His home stayed on the market for two years and had one viewing. This time, it took four months. In this market, that seemed like an eternity.

“I found a few places I wanted, but they got taken up,” he said. “Stuff just disappears quickly. I had a contract on another house about two months ago, and someone came in on top of me and offered more. It’s almost like musical chairs. It’s not an issue of seeing things I want. It’s just getting to it.”

The market could change just as quickly in the next few months. Mortgage rates have been slowly rising since the beginning of 2022. While still relatively low, that could change. The current fixed 30-year mortgage rate is just slightly above 5 percent, a 52-week high.

Norton said rising rates should cool off the market, though that may not show up until the mid-to-late summer as consumers rush to lock in rates. And as robust as sales were last year, they would have to cool down.

Take Huntsville, for example, which saw a record year of sales in 2021. Norton said sales were up 5.3 percent last year, while price increased more than 16 percent. In Baldwin County, sales soared 21.3 percent, while price was up 16.2 percent.

“Inventory is tight in Baldwin County, but not to the extent it is in Huntsville,” he said. There are an average of about 600 listings a month in Huntsville. Two years ago, that number was 925 a month, Norton said.

The current real estate market is a creation of several factors. Even before the COVID-19 pandemic began, markets nationwide were coping with a shrinking amount of available housing. Then in 2020, interest rates were slashed as an economic measure, prompting lending activity. People spending time at home had idle hours to look at real estate websites and virtual home tours, so the logic goes.

Since then, those same low rates have kept the market humming, aided by the migration of tech workers from high cost-of-living states to regions in the South. Alabama is seeing this, to some degree.

“You’re seeing it in the places like Huntsville, Birmingham, and Baldwin County,” Norton said. “People moving in from out-of-state for employment reasons, where their housing dollars go a bit further. That was happening before the pandemic, but the pandemic accelerated this.”

So with insatiable demand and shrinking supply, the rising prices follow. Rising interest rates should make it more difficult to purchase, cooling off the market, which would bring down prices and presumably, buy some time to build up the inventory of available homes.

And Alabama is not unlike markets nationwide. Lawrence Yun, chief economist with the National Association of Realtors, called it a “double whammy” for buyers - rising mortgage rates and sustained price hikes.

“Some who had previously qualified at a 3v percent mortgage rate are no longer able to buy at the 4 percent rate,” he said.

In the meantime, the sellers — and buyers — wait.

“I’m happy to have gotten to this point,” Crauswell said. “I didn’t land in the ideal spot, but it’s close enough.”