Sales: According to the Mobile Area Association of Realtors, Mobile-area residential sales totaled 243 units during January, a decrease of 10.3 percent from the same month in 2017, when there were 271 residential sales. Current results are 4.5 percent below the five-year monthly average of 254 closed transactions. Two more resources to review: Quarterly Report and Annual Report.
Forecast: January sales in the Mobile area were 44 units or 15.3 percent below the Alabama Center for Real Estate’s (ACRE) monthly forecast. ACRE projected 287 total sales during January, while there were 243 actual sales during the month. ACRE forecasts a total of 4,598 residential sales in the area during 2018; there were 4,491 actual sales during 2017.
Supply: The Mobile-area housing inventory in January was 1,582 units, a decrease of 19.5 percent from January 2017. Inventory has declined 53.6 percent from the 10-year January peak of 3,413 units reached in 2010. The five-year average for the area during January is 2,408 listings.
Demand: January sales decreased 30.6 percent from December. This is consistent with historical data indicating that January sales on average (2013-2017) decrease 11 percent from the month of December. Homes selling in the area during January averaged 86 days on the market, an increase of two days from the days-on-market average from the same month in 2017. Homes sold 24 days faster than the five-year January average of 110 days on the market.
Seeking balance: The inventory of homes for sale divided by the current monthly sales volume equals the number of months of housing supply. Most real estate professionals consider the market to be in balance at approximately 6 months of housing supply. The Mobile area currently has 6.5 months of housing supply, down from 7.2 months during the same period in 2017. The five-year average for the month of January is 9.6 months of housing supply.
Pricing: The Mobile-area median sales price in January was $148,000, an increase of 16.5 percent when compared to the median sales price from this time last year. The January median sales price increased 5.8 percent from the previous month. This rise in median price from the previous month goes against historical data, which indicate that January median sales prices on average (2013-2017) decrease 6.4 percent from the month of December. Pricing can fluctuate from month to month as the sample size of data is subject to seasonal buying patterns. ACRE highly recommends consulting with a local real estate professional to discuss prices, which can vary from neighborhood to neighborhood.
Industry perspective: The recent headlines in the real estate world have revolved around rising interest rates. As of Jan. 31, the interest rate on a 30-year fixed-rate mortgage was 4.38 percent. This is up from 4.18 percent on Jan. 10 and up from 4.08 percent on Dec. 6, 2017. The stock market has rebounded somewhat from its large selloff on Friday, Feb. 2, and Monday, Feb. 5, as investors adjust from an accommodating monetary policy to one with some inflation and higher interest rates. The recent market decline is a signal of a return to normalcy and higher debt costs. Rising interest rates, however, do not cause housing activity to come to a halt, in the same way that rising rates do not cause businesses to go into hibernation. In the spring of 2006, the Federal Reserve stopped raising interest rates after raising rates 16 times over a three-year period. The economy was performing well during this time (2004-2005) of rising interest rates. The Great Recession happened, interestingly enough, at a time when interest rate increases were halted.
Home ownership rates increased to 64.2 percent during 2017 after falling to a post-1965 low of 62.9 percent in 2016. Not surprisingly, home ownership rates peaked during 2005 at approximately 69 percent. Millennial home ownership rates are also on the rise as their employment situations continue to improve. Millennials, in fact, have been recently credited with an improvement in suburban housing markets as not all are city dwellers. This rise in home ownership was highlighted recently at the annual TrendLines 2018 program in Washington, D.C., with an analysis of Census Bureau housing data presented by Sage Policy Group, Delta Associates and Transwestern. The following excerpt is from the closing paragraph from the home ownership report, and is encouraging news for residential real estate markets across the nation:
“This year, the most common age in America will be 26 years old. There is also an abundance of 25- and 27-year-olds. All of these people are millennials, America’s largest and most educated generation. As more of this demographic block marches into their 30s, demand for ownership opportunities will rise. While there may be downturns that occasionally suspend these demographics, the next decade stands to emerge as a period of rapidly expanding home ownership and single-family homebuilding in America.”