Huntsville, Alabama Housing Market Report | Q3 2023
The Huntsville, Alabama real estate market's Q3 report reveals insights on pricing resilience, market challenges amidst rising interest rates, shifts in home sales, and inventory dynamics. Additionally, economic factors such as GDP growth, population trends, and household incomes play a pivotal role. Amidst these shifts, the question emerges: Can new construction meet the escalating demand, or will the market face a potential supply crunch in the near future?
Median Sales Price, Home Sales, & Pending Sales
What stood out to me was the median sales price, only dipping by 1.3% year over year. It's quite impressive considering the recent surge in interest rates over the past 12 months. This resilience seems to mirror the strength of the job market and the influx of relocations pouring into the Huntsville market.
Naturally, the hike in interest rates has impacted home sales over the last year. Comparing this year's Q3 to last year's, there's been a significant 20.3% drop in home sales—2,331 homes down to 1,858. This puts us back to levels reminiscent of 2017, a span of about six years. As a side note, I think that if we descend back to the mid to low 6% range, we might witness home sales reminiscent of the COVID period, around 2,500 or more for a quarter.
Pending sales have also decreased this month, as expected due to the decline in home sales and the increase in interest rates. Pending sales have dropped by 21.7%. As a result, the number of homes being sold continues to decline towards the end of 2023, particularly with interest rates peaking above 8%.
Housing Inventory & Days on Market
With fewer homes being sold, naturally, the inventory in the market is growing. Listings have surged by 20.8%, rising from 1,496 to 1,807. Despite this increase, it still only represents a 2.7 months' worth of supply compared to merely 1.1 months of supply at this time last year. Technically, this still indicates a seller's market. Anything below four months is considered a seller's market. Our average days on the market stand at 26 days, a considerable increase from 12 days last year. This market remains one of the most favorable I've worked in over the past fifteen years. Even a decade ago, it outpaced the market in terms of swift home sales. It might not feel that way considering the hyper seller's market experienced in the past couple of years.
One piece of excellent news for buyers is that inventory has increased across all the different price bands, except for the $350,000 to $500,000 range. One reason for this is the immense popularity among move-up buyers and the substantial new construction happening in that particular price range. It currently constitutes 26% of the market, with 477 homes sold.
Even more critical than that price range is the bracket just below, ranging from $200,000 to $350,000. When you combine these price bands, they account for 46% of the market, totaling 856 homes sold. This price range holds significant importance because it's where median-income families can afford homes in the Huntsville area. As people move into the region and buy their first homes, this price band becomes a crucial market for starter homes in our area. The remarkable thing is that the $250,000 to $300,000 price range has surged by an incredible 91.5%. Hats off to our local builders. It's impressive how they managed to achieve this despite inflation and rising land values, creating an affordable product here in Huntsville for our first-time homebuyers.
Huntsville, AL Q3 Economy Stats
Some other local economy stats revealed in this report show that our GDP has risen to $25.4 billion from $23.9 billion so our growth in this market continues.
Our population is also witnessing an influx of individuals and families moving to the Madison County area. We've reached 406,026 people from 400,898 at this time last year.
Additionally, great news for our area is that the median household income has continued to increase. The household income last year was $76,977, and it's now up to $81,968. I believe this is another reason why many buyers should consider purchasing a home now. Some buyers tend to wait until they receive a promotion or a raise at work. However, what often happens is that as they receive promotions and raises, we're also observing inflation and rising home values. Therefore, I strongly encourage people to invest in a home today, securing their purchase price. Later, when they receive that raise, they can benefit from a higher quality of life and standard of living instead of merely allocating those funds towards inflation and higher purchase prices.
In conclusion, we're moving in the right direction regarding supply in this area. We're still below the typical housing supply of 4 to 6 months, but progress is being made, and that's promising. Now, on the other hand, the challenge lies in the fact that we're experiencing interest rates at a level not seen in over a decade or even higher. Yet, we still haven't reached that 4 to 6 months' worth of supply. Interest rates have been decreasing, and if this trend continues into 2024, I anticipate it will impact our housing supply. Many potential buyers may emerge from the sidelines and swiftly absorb a significant portion of that inventory. Moving forward, what we need to focus on is whether new construction builders can keep up with the area's demand, or will we find ourselves in a low supply situation in 2024 or 2025?Posted by Matt Curtis on