Sales: According to the Wiregrass Multiple Listing Service, there were 68 residential sales in the Wiregrass region during January, a 2.9 percent decrease from one year ago. Existing single-family homes accounted for 88 percent of all residential sales, while 12 percent were newly constructed homes. Two more resources to review: Quarterly Report and Annual Report.
For all of the Wiregrass area housing data, click here.
Forecast: January sales were two units or 3 percent above the Alabama Center for Real Estate’s (ACRE) monthly forecast. ACRE projected 66 residential sales for the month, while there were 68 actual sales. ACRE forecasts 1,043 total sales for the Wiregrass region during 2018, a slight drop from the 1,047 actual sales in 2017.
Supply: Wiregrass area housing inventory totaled 709 listings, an increase of 2.5 percent from one year ago. The Wiregrass region had 61 newly constructed homes listed for sale in January and 684 existing single-family homes listed. Inventory in the region increased 8.7 percent from the previous month. This trend is consistent with historical data indicating that January inventory on average (2013-17) increases from December by 1.3 percent.
Demand: January residential sales were down 17.1 percent from the prior month. This drop in sales is to be expected, as January sales data from 2013-17 indicate that January sales on average decrease from December by 8.3 percent. The average number of days on the market until a listing sold was 118 days, a 35.2 percent improvement from 182 days on the market one year ago. This statistic has seen much improvement since peaking in January 2012 at 213 days on the market.
Seeking balance: The inventory for sale divided by the current monthly sales volume equals the number of months of supply. Most real estate professionals consider the market to be in balance at approximately 6 months of supply. The inventory-to-sales ratio during January was 10.4 months of housing supply, up from 8 months of supply one month ago and up from 9.9 months of supply one year ago. In other words, at the January sales pace it would take 10.4 months to absorb the current inventory for sale.
Pricing: The Wiregrass area median sales price in January was $120,000, an increase of 3 percent from one year ago and a 0.6 percent increase from the previous month. It should be noted that the differing sample size and seasonal buying patterns can contribute to statistical volatility, including pricing. ACRE recommends consulting with a local real estate professional to discuss prices, as they will 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.”
Click here to view more graphs from the Wiregrass Region January Housing Report, including Total Sales, Average Sales Price, Days on the Market, Total Inventory and Months of Supply.