Sales: According to the Greater Alabama Multiple Listing Service, Birmingham metro-area residential sales totaled 785 units during January, representing a 5.9 percent decrease from January 2017, when 834 homes were sold. Of January’s residential sales, 85 percent were existing single-family homes, while 4 percent were condos and the remaining 11 percent were newly constructed homes. Two more resources to review: Quarterly Report and Annual Report.
For all of the Birmingham area’s housing data, click here.
Forecast: January sales were 89 units or 10.2 percent below the Alabama Center for Real Estate’s (ACRE) monthly forecast. ACRE projected 874 total sales for the month, while actual sales were 785 units. ACRE’s 2018 sales forecast projects 15,366 closed transactions for the year. There were 14,915 actual sales in the area during 2017.
Supply: The Birmingham-area housing inventory in January totaled 4,943 units, a 15.8 percent decrease from January 2017 and down 58 percent from the January peak in 2008 (11,757 units). According to the Greater Alabama MLS, there were 6.3 months of housing supply during January, a 41 percent decrease from the previous month. The “months of housing supply” is a simple calculation – homes listed (supply) divided by homes sold (demand). Generally speaking, the market is in balance at 6 months of supply.
Demand: January residential sales decreased 29.1 percent from the prior month. Historical data indicate that January sales on average (2013-17) decrease from December by 21.9 percent. Sales closing in January averaged 71 days on the market, an increase of 12.7 percent from the previous month. Residential sales this time last year averaged 75 days on the market, 4 days above current results.
Pricing: The median sales price in January was $185,000, unchanged from this time last year. The January median sales price decreased 5.1 percent from December. This trend is consistent with historical data (2013-17) which indicate that the January median sales price on average decreases 8 percent from December. Pricing can fluctuate from month to month as the sample size of data is subject to seasonal buying patterns. ACRE recommends consulting with a local real estate professional who has access to pricing data at the neighborhood level.
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.”
Click here to generate more graphs from the Birmingham January Housing Report, including Total Sales, Average Sales Price, Days on the Market, Total Inventory and Months of Supply.