May 2022 Housing Market Report

The market is finally starting to cool down nationally as the interest rates start to rise but the question is, “What is happening here locally in the Huntsville real estate market?” 

I was reading an article by the National Association of Realtors where they were stating that the volume, not sales prices, but the sales volume has actually decreased 3.2% month over month. I was also looking at a article where they're actually now predicting that home sales nationally decrease, not the actual sales price, but the volume decreases 6.7% over the next year. Other articles and other economists are predicting as much as 20% decline in sales nationally. Again, this is not home sales prices, but the number of sales decreasing over the next two years about 20% and that is due to a lack of affordability.

Locally what we've seen over the last month is we've actually seen it increase at 3.2%. Huntsville is still very much insulated from the rest of the country due to all the job growth and the demand that we have in this local market.

Interest Rates

Interest rates have been a big talking point the last few days and really the last couple of months. I personally did not think that we were going to see rates hit above 6%. I just did not think with the level of debt that the Fed had that they could afford to raise interest rates because they're also the biggest borrower on that debt. They did actually raise rates again, and that made the market get a little skittish.

Interest rates got above 6%, even got it into the mid 6% ranges before they started to settle back down below 6% last week. I wasn't the only one that didn't think they were going to go above 6%, Redfin actually came out with an article from their economist on June 13th saying they thought rates were going to be at the 5.5% range by the end of the year.

The Fed has committed to raise interest rates to lower the demand in the market. They said that they are likely going to continue to raise federal fund rates over the next several months and really the next year or so. That's going to create a lot of uncertainty in the marketplace.

So If you're buying a home, know that interest rates are going to likely continue to go up over the next year. They're going to spike and come back down, spike and come back down; so that's why I’d be looking for interest rates slightly below the 6% range but it's actually looking like we may hit 7% over the next 12 months.

Housing Supply & Listing Inventory

We have about a 5.5 million home deficit across the country so one of the biggest challenges that has continued to push prices up is supply and demand. The biggest thing is there just hasn’t been enough inventory for buyers to choose from, which has been the reason why we're getting in these bidding wars.

The good news for buyers is that we actually saw a 11.3% growth in listing inventory year to date, and then a 19.6% growth in May alone. That signals that we're going to continue to see more supply, which is good for buyers. It also signals that a lot of sellers are probably thinking we're close to the peak in terms of values so they're trying to get in on the selling game before those values start to peak. 

Even with the increase of supply, that actually hasn't affected the days on market yet. That number continues to drop as we're currently looking at an average of 14 days on market, whereas this time last year we were 18. We're at 1.3 months worth of supply for the entire market, keep in mind that a four to six month supply is what's considered a healthy market. Anything below that four months is considered a seller's market, at 1.3 months we're still in that extreme sellers market.

What we're seeing here at Matt Curtis Real Estate is those home values, average and below, are still the super hot ranges. Interest rates are pushing more and more buyers down into those price ranges so they're still competitive and still seeing multiple offers go above list price. Whereas the higher price points, especially as you get to $650k and above, are starting to see softening. We've seen four to six months worth of supply, which is kind of a normal market. We've seen price adjustments and we've seen sellers having to negotiate on some concessions to get buyers under contracts on these homes in the higher price range.

We also continue to see price growth even with the higher interest rates and with what's going on with listings. We're seeing the median sales price come in at $313,701 but the average sales price is actually $348,464. You're going to see softening in the higher price points but anything around the average price or below is going to be super competitive. This will likely continue to push that average sales price up in the Huntsville area because we're $100,000 below the national average, so a lot of individuals and families are relocating to this area.

The biggest challenge that I see for Huntsville, and really nationally, is how these rising housing prices and rising interest rates affect millennials. One of the measures that we look at is the Affordable Housing Index, Huntsville just reached below 100 for the first time back in March. To contrast that, Huntsville had a 200 rating back in 2005. Housing has become a lot less affordable in the Rocket City but we're still more affordable than the rest of the country. The challenges with rising interest rates, rising prices, and rising rents means a lot of millennials may become lifetime renters if they don't go ahead and lock in a price on a home. That is not good for our local economy or even the national economy.

Matt's Advice

Here's my recommendation. We still have that 5.5 million home deficit and we have rising interest rates, which is actually going to cool off the number of homes being built so we're not likely to cut into that 5.5 million home deficit any time soon. There will also be decreased demand shortly with rising interest rates, but that's going to be a period of time until interest rates start to lower again. We're likely to get into that crazy cycle that we've been in all over again because we still have that supply and demand challenge with a 5.5 million home deficit.

What I do is I go ahead and try to lock in my home purchase price as soon as I can because interest rates are going to likely rise another point over the next year. Lock in your purchase price and refinance as rates get better. I'm seeing a lot of lenders out there right now that are putting teaser interest rates out there with really high points. I would steer clear from those because you're going to likely find a better interest rate, in my opinion, over the next few years.

I wouldn't waste money on points right now. Lock in your price, lock in your interest rate so it doesn't go up any higher, and then go ahead and refinance as those rates come back down. Personally, I think the risk is just way too high of you getting priced out if you're sitting on the sidelines waiting for prices to change.


Posted by Matt Curtis on


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