Jeff Steth is ready to sell his Helena home.
He and his wife, Kristi, have lived in a house on Al Amana Street for the past fourteen years as their six children have come of age. Now, the couple is looking to sell their 3,200-square-foot home and downsize.
to the cart.
“We will probably live in it for a year until the price of the materials goes down so that we can rebuild,” he said.
The house was put on the market late last month and already had two open houses. At the same time, two houses in his neighborhood have already been sold.
“It’s crazy,” he said.
Home sales in Alabama are white hot, and have been for more than a year, as the ongoing economic effects of the pandemic 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 18.3% increase from the previous year.
In February, demand was up 3% year over year, while supply was down 26%. Monthly listings are down 25.6% from the previous year.
This means that at the current sales pace, all active inventory in the statewide market will be sold out in 1.4 months. Analysts feel that buyers and sellers have roughly equal negotiating power with six months of supply.
The average number of homes sold in February was 48 days on the market, the fastest 19 days from last year.
“It’s a very tough market for buyers,” said Stuart Norton, analyst and co-director at ACRE.
“And I don’t see that changing drastically in the short term going forward. But we will probably see some moderation in prices.”
These circumstances are somewhat reflected in Steth’s home.
It was valued a few years ago at $216,000. Now, it is valued at around $400,000.
The story is similar to David Croswell, who lives in a country house near Jasper but is looking to get closer to town for comfort and better internet access.
He said the last time he thought about selling was in 2013. His house has been on the market for two years and he’s seen it once. This time, it took four months. In this market, that seemed like an eternity.
“I found some places I wanted, but they were taken over,” he said. “Things are quickly disappearing. I had a contract on another house about two months ago, and someone came over me and offered more. It’s almost like musical chairs. It’s not an issue of seeing the things I want. It’s just getting there.”
The market could change just as quickly in the next few months. Mortgage rates have continued to rise slowly since the beginning of 2022. Although they are still relatively low, that could change. The current 30-year mortgage rate is just over 5 percent, a 52-week high.
Norton said higher prices should calm the market, although that may not appear until mid-to-late summer as consumers rush to fix prices. And as strong as sales were last year, they’ll have to cool off.
Take Huntsville, for example, which had a record year of sales in 2021. Norton said sales were up 5.3% last year, while the price was up more than 16%. In Baldwin County, sales are up 21.3%, while price is up 16.2%.
“The stock is tight in Baldwin County, but not to the extent that it is in Huntsville,” he said. Huntsville has an average of 600 listings per month. Norton said that two years ago, that number was 925 per month.
The current real estate market is a product of several factors. Even before the COVID-19 pandemic began, markets across the country were dealing with a shrinking amount of housing available. Then in 2020, interest rates were lowered as an economic measure, which led to lending activity. People spending time at home were idle hours perusing real estate websites and virtual home tours, so the logic goes.
Since then, those same low rates have kept the market thriving, fueled by the migration of tech workers from countries with a higher cost of living to regions in the South. Alabama sees this, to an extent.
“You see it in places like Huntsville, Birmingham, and Baldwin County,” Norton said. “People who move out of state for employment reasons, their housing money goes a little further. That was happening before the pandemic, but the pandemic has accelerated that.”
So with insatiable demand and shrinking supply, price hikes follow. Higher interest rates should make it more difficult to buy, calming the market, which should drive prices down, and should buy some time to build up a stock of available homes.
And Alabama is no different from markets across the country. Lawrence Yun, chief economist at the National Association of Realtors, called it a “double whammy” for buyers — rising mortgage rates and persistently rising prices.
“Some of those who previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate,” he said.
Meanwhile, sellers and buyers are waiting.
“I’m glad I got to this point,” said Kraswell. “I didn’t land in the perfect spot, but it’s close enough.”
