Sales: According to the Montgomery Area Association of Realtors’ Multiple Listing Service, Montgomery-area residential sales totaled 239 units during January, a decrease of 22.1 percent from January 2017’s total of 307 residential sales. Existing single-family homes accounted for 90 percent of all residential sales, while newly constructed homes were 10 percent. Additional resources to review are the Quarterly Report and the Annual Report.
Forecast: Closed transactions during January were 53 units or 18.2 percent below the Alabama Center for Real Estate’s monthly forecast. ACRE projected 292 sales for the month, while actual sales were 239 homes. ACRE forecasts a total of 4,637 residential sales in the Montgomery area during 2018. There were 4,400 actual sales in the area during 2017.
Supply: The Montgomery-area housing inventory in January was 1,955 units, a decrease of 9.5 percent from January 2017 and 39.5 percent below the 10-year January inventory peak reached in 2008 (3,229 total listings). January inventory in the Montgomery area increased 1.8 percent from the prior month. This direction is consistent with historical data indicating January inventory on average (2013-17) increases 1.2 percent from December.
Demand: January residential sales decreased 30.5 percent from the prior month. This trend is consistent with historical data indicating that January sales on average (2013-17) decrease from December by 15 percent. Listings that sold in the Montgomery area during January averaged 113 days on the market, an increase of 8.7 percent from the same month last year. The five-year days-on-market average for January is 125 days.
Seeking balance: The inventory for sale divided by the current monthly sales volume equals the number of months of supply. Many real estate professionals consider 6 months of housing supply to be the equilibrium point, with buyers and sellers having equal bargaining power. There were 8.2 months of housing supply during January, up from 7 months of supply one year ago and up from 5.6 months of supply in December.
Pricing: The Montgomery-area median sales price in January was $144,900, down 2.4 percent from January 2017’s median sales price of $148,500. The median sales price decreased 6.5 percent from the prior month. This trend is consistent with historical data (2013-17) indicating that the January median sales price decreases from December by 10.1 percent. Pricing can fluctuate from month to month as the sample size of data (closed transactions) is subject to seasonal buying patterns. ACRE recommends contacting a local real estate professional for additional market pricing information.
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.”