Q2 Huntsville Housing Market Report

The Huntsville housing market's Q2 data reveals several key trends that indicate shifts in both sales activity and pricing dynamics. While overall sales remain relatively flat, there are notable fluctuations within specific price points, suggesting varying levels of demand across the market. New construction continues to play a crucial role, with a significant portion of sales attributed to these properties, reflecting builders' efforts to address ongoing supply challenges. Additionally, the increase in inventory and days on market hints at a more balanced market approaching, even as interest rates and inflation influence buyer behavior. As Huntsville's population grows, these factors collectively shape the area's real estate landscape heading into the latter half of the year.

Median Sales Price & Homes Sold

The Q2 numbers are in for the Huntsville area market. Let’s start with the numbers everyone wants to know: the average sales price. Unfortunately, this report did not include that figure. However, it did provide the median sales price, which came in at $339,452, showing a slight increase of 0.2% year over year. If you're interested in the average sales price, it's likely closer to the $370,000 to $380,000 range.

Home sales have slowed for the second year in a row, coming off the peak numbers we saw during the pandemic in 2020. Q2 of 2023 recorded the lowest sales since 2016. This quarter was almost flat, with 1,934 homes sold last year compared to 1,994 this year, marking just a 3.1% increase. We are essentially on track with 2017 sales numbers, a couple of years before the pandemic.

Of those sales, 35% were new construction. Builders are definitely doing their part. Without the additional supply they're introducing, local housing numbers would be significantly lower. In fact, new construction sales have doubled since 2015. The good news is that there’s a lot of new construction being developed, which will help in the long term with the housing supply shortage we’ve experienced. Builders are a key factor this quarter, contributing 35% to overall sales.

More Negotiations Happening in the Market

The good news for buyers is that there are more negotiations happening in the market right now. It’s a mixed situation that benefits both sellers and buyers. Forty percent of sales are closing at an average of 4% below list price, which is good news for buyers. On the other hand, 60% of homes are still being sold at or above list price—41% at list price and 19% above list price—even in the current market. It's still a strong market for many sellers, but it’s important to note that this doesn’t account for seller concessions. Even when homes sell at or above list price, sellers may still be offering closing costs or other concessions to make deals work.

Sales Relatively Flat Except in Certain Price Points

As mentioned, sales have been relatively flat year over year, but certain price points have seen significant increases. At the $150,000 to $200,000 price point, sales are up 22.4%. This isn’t surprising since homes in this range are becoming less affordable, and when they do hit the market, buyers are quick to act. The key difference this year compared to last is the increase in inventory at this price point. Any available inventory in the $150k-$200k range is quickly absorbed by the market.

A surprising trend is in the $650,000 to $800,000 range, where sales are up 18% year over year. Homes priced at $800,000 and above have seen an even more dramatic increase, up 45.1%. Several factors contribute to this, including higher interest rates, which are leading cash buyers to prefer purchasing homes outright instead of financing. For some, real estate has become a more appealing investment compared to other options like money markets.

The luxury market also plays a significant role. The current economy has created a divide between those with assets and those without. Unfortunately, those without assets are struggling with inflation and rising costs, including housing affordability. On the other hand, those with assets have benefited from rising property values and record-high stock prices. Even with recent stock market corrections, overall values remain at record highs, along with precious metals and real estate. Buyers in the upper price points are capitalizing on this market, undeterred by higher interest rates.

Looking back just seven years to 2017 highlights the inflation we’ve experienced in Huntsville and across the U.S. Sales of homes priced below $150,000 have dropped by 90% since 2017, reflecting the significant inflation we’ve seen over the past seven years.

Days on Market & Pending Sales

The average days on market have remained relatively flat year over year, currently at 41 days. This is close to the pre-pandemic number of 45 days, but still below what's considered normal, like back in 2016 when the average was 92 days. It might not feel like we're in a hot market where homes are selling quickly, but compared to eight years ago, homes are selling over twice as fast.

Pending sales have also declined, down 21.7% year over year. This is a concerning trend for the remainder of the year, as closed sales have remained relatively flat. The drop in pending sales suggests we could see a worse year in terms of the number of sales in the Huntsville area compared to 2023, with pending sales falling from 534 to 418.

Listings & Months’ Worth of Supply Are Up

One of the most significant updates for buyers is that listings have increased by 20.8%, from 1,496 to 1,807. This means more homes to choose from and more supply available. We're currently at 3.2 months' worth of supply for Q2, and that number is continuing to inch closer to the four-month mark as we move through August. While 3.2 months' worth of supply technically indicates a seller’s market, the increase toward four months suggests we're approaching a more balanced market, typically considered between 4 to 6 months of supply. Inventory alone rose 43% in June 2024, with the most significant increases in the $200,000 to $250,000 price range, up 135.6%, and in the $250,000 to $300,000 range, up 104.7%.

Some of this increase in inventory comes from new construction in the $250,000 to $300,000 range, as builders work to improve affordability. Given the affordability index and average household income in Huntsville, homes in this price range remain accessible for most families in our area. Builders are responding well by adding supply in this price bracket.

Inflation, Interest Rates, & Population Growth

To wrap things up, a few quick facts: Inflation, as reported in the headlines, continues to decrease, at least according to current measurements. Inflation is now down to 3%, compared to 4.1% this time last year and 8% in 2022. So, it's moving in the right direction.

Interest rates averaged around 7% in Q2, but if you're watching this in August, rates have been coming down, offering some much-needed relief for Huntsville home buyers.

Finally, Madison County's population continues to grow. While we don't have the final numbers for 2024 yet, last year the population increased to 412,600 people in Madison County alone.

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• Housing Market Report (18)