Expert Advice for Homebuyers & Sellers in Huntsville, AL
With a shifting real estate market and high-interest rates leaving homebuyers and sellers uncertain about their next steps, we look at the current real estate landscape in Huntsville, Alabama and break down the opportunities available, whether you're buying or selling your home.
For homebuyers, now presents a prime opportunity despite the higher interest rates. For home sellers, the low supply could offer the perfect chance to capitalize on rising equity, but it's crucial to consider market factors. While interest rates are impacting the residential real estate market, the influence of commercial real estate on regional banks could potentially lead to repercussions for borrowers.
Whether you're in the market to buy or sell in Huntsville, this information can assist you in making the best decision based on your situation.
Why Now is the Ideal Time to Buy in Huntsville, Alabama
With interest rates reaching a 20-year high, my next recommendation might sound a little self-serving, but I'm suggesting that buyers who are capable of making a purchase should consider doing so at this moment. I understand what you might be thinking: a typical salesperson always claims it's a great time to buy, but that’s simply not the case. However, I'm recommending it right now for several compelling reasons, which we'll delve into shortly. The most significant factor is that I, as an investor, am currently making purchases myself, so I genuinely believe in what I'm about to share with you.
One of the reasons why I believe that now is an excellent time to buy and truly take advantage of this market is related to an article recently published by Realtor.com. In the article, Huntsville was ranked as the number one city in the US in terms of the increase in price drops year over year. Essentially, last year, we didn't see many price drops, but this year, we are experiencing a significant increase in price drops, largely due to new construction.
Several factors are at play due to the high level of interest in Huntsville. Many large national builders have established a presence here and are heavily investing in our area to expand our housing inventory. However, as a result of this and the higher interest rates, they've found themselves grappling with an excessive amount of inventory toward the end of the year. What do large national publicly traded builders aim to achieve by the year's end? They try to offload all this inventory from their books before the year is over. This situation doesn't only involve large national builders but also some small local builders who opted for a more speculative approach rather than pre-sales. One of the primary reasons for this choice is the continuing rise in commodity prices. They wanted to ensure they could maximize their profits from home sales by pricing the homes "after sheetrock," essentially once they had all the pricing information for the home. This is how we arrived at our current situation, where interest rates have increased, and builders are incurring more interest expenses on all these homes.
With that said, we currently have a surplus of inventory, leading builders to reduce prices significantly. They're providing various incentives, such as free refrigerators, complimentary fences, and substantial contributions towards closing costs. Additionally, they're offering rate buy-downs. This presents a tremendous opportunity for buyers to capitalize on new construction deals. However, these favorable conditions are also affecting the resale market. Sellers who need to sell during this period are compelled to make concessions and reduce prices to attract buyers, especially in comparison to the allure of new construction homes.
Maximizing Opportunities in Huntsville Real Estate
Not only is this a great opportunity to capitalize on new construction but arguably the best opportunity I've seen in new construction since the Great Recession of 2008. In fact, I believe it's an even better opportunity due to the presence of equally attractive or even better incentives. Back in 2008, it was akin to catching a falling knife because while incentives were offered, prices were still on the decline whereas prices are staying steady here in the Huntsville market and really across the US as well.
That's why I believe it's an excellent opportunity to make the most of new construction and even some of the resale properties. Furthermore, the average income in the Huntsville area has increased significantly. Our overall income has risen by 30% over the past two years, primarily due to the influx of high-paying government jobs to the region. This has led to a remarkable increase in household income in our area, which is quite remarkable, especially considering that the Wall Street Journal recently reported a decline in average household income over the last three years when accounting for inflation.
Our Huntsville market is performing well in terms of income and buying opportunities in Q4. If you happen to fall into the 15% category where we boast one of the highest percentages of households earning $100,000 or more, I highly recommend considering a shift from Federal Reserve notes. When you delve into it, you'll find that they're not worth the paper they're printed on. It's advisable to transition into real money and tangible assets, and one of the most effective ways to do so is by investing in real estate at this time.
Implications of Commercial Real Estate on Regional Banks
Another factor to consider if you're looking to make a purchase in Q4 is the expected crash of commercial real estate across the US, likely occurring within the next six to possibly 24 months. As this situation unfolds, you might wonder, "Well, commercial real estate may not be as affected here in Huntsville." However, what will be impacted are the regional banks. Regional banks typically serve as the preferred lenders for commercial real estate, including apartment complexes and high-rise office buildings. You might not expect local regional banks to be involved in high-rise projects in cities like New York and others, but the reality is that these regional banks often invest in these debt instruments and participate in lending in other cities.
This situation could have an impact on borrowers who depend on what you might refer to as private lending from regional or local banks. If you're not securing a conventional FHA or VA type loan and your circumstances necessitate a private loan from a local bank, you could potentially be affected by these developments. Moreover, this issue could potentially have broader repercussions on the overall economy, as lending conditions might significantly tighten over the next couple of years.
Buying Opportunities Outside of Huntsville & Madison
For individuals looking to purchase and maximize their return, whether for investment purposes or to get the most value out of their home resale, it's essential to consider some local statistics. Huntsville and Madison are shown to be trailing behind many areas outside of the county. Some of these counties are experiencing significant growth due to their more affordable property options, greater potential for affordability improvement, and ongoing infrastructure development that attracts buyers. These areas remain relatively close to Redstone Arsenal and the majority of employment opportunities in the Huntsville region. When it comes to price appreciation over the past several years, Huntsville and Madison have lagged behind areas such as Decatur, Priceville, Hartsville, Athens, and Hazel Green.
Advice for Selling Your Home in Huntsville, Alabama
Shifting to recommendations for sellers, if you're a seller examining your equity, which has increased by an average of 70% over the past five years and are considering leveraging that equity to transition to the next phase of your life—perhaps moving closer to grandkids or retiring in another state—now presents an excellent opportunity to explore these options. This is due to the fact that we're currently experiencing record prices and still have insufficient inventory to meet the demand from buyers in the market. So, if you're a seller, this is an opportune moment to make the most of it.
If you're considering selling and aiming to capitalize on the inflation we've experienced in this market over the past five years, it's crucial to hire a competent agent now more than ever. Your choice of agent matters significantly because it's no longer as simple as placing a sign in the yard and expecting a sale. Due to increased competition from builders, it's vital to engage an agent who excels in analyzing market data and understands the actions of competitors. Your property might be situated in an area directly competing with new construction, or it might not be affected at all. Regardless, you need a real estate agent with access to this information who can provide sound advice.
It's also important to have a real estate agent that has high integrity and that can help you meet your goals. You may have a flexible timeframe. You may need to sell right away, but depending on your specific objectives in the market, your agent should provide you with the best advice to achieve the most favorable terms, whether that means selling your home quickly, getting the best price, or whatever that may be. They should prioritize your interests when it comes to the timing of the sale. Should it be this quarter or should it be after some of the current inventory has been sold? Really, it all depends on your unique situation, which is why it's crucial to hire someone who understands the market dynamics, is well-versed in the numbers, and genuinely has your best interests at heart.
Looking to buy or sell a home in Huntsville, Alabama? Contact us today!
Posted by Matt Curtis on