Huntsville Housing Market Report | August 2023
The August 2023 Huntsville Housing Report is here, and it brings insights into the local real estate landscape. We'll be discussing the impact of reduced new listings on both sellers and buyers, along with the implications of declining pending sales. Closed sales have taken an unexpected turn, particularly in the context of new construction projects. Median sales prices are also under the spotlight, showing interesting trends across various areas. Housing affordability remains a concern as it continues to fluctuate, influenced by rising interest rates. Lastly, we'll look into housing inventory and supply, revealing key indicators of the current market status. If you’re looking to buy or sell a home in Huntsville, this report could provide you with key information to help you make the best decision based on your situation.
New Listings, Pending & Closed Sales
New listings are down 5.5% year over year from 803 last August to 759 this year. That's good and that's negative all the same time. It’s good for sellers that are trying to get the most money for their homes because there's less inventory to choose from. The negative impact is on buyers. There simply isn't enough supply in the marketplace, and not enough new options are becoming available for buyers looking to make a purchase this season.
In line with the decline in new listings, pending sales are also down by 3.75%. With fewer listings on the market, there are fewer sales in the marketplace. The number has decreased from 645 to 621, which is in line with expectations given the reduced listings and higher interest rates. There is expected to be slightly less demand during the Q4 compared to last year.
Closed sales are the statistic that will truly make you scratch your head. While we have new listings down by 5.5% and pending sales down by 3.75%, closed sales have plummeted by 21% in the North Alabama area year over year, dropping from 753 units to 595 units. The primary reason for this decline is closely tied to new construction.
Many builders, or a significant number of builders, were employing a strategy known as presales. In this approach, a buyer would contract a home, select their preferences, and then close on it at the end of construction. However, this strategy faced challenges due to delays in supplies and other factors, causing many new construction projects to take longer than anticipated. Instead of the usual six months, some homes took 12 or even 18 months to complete. When comparing closings last August to this year, we don't observe the same level of pent-up demand for new construction. Additionally, many builders have shifted towards speculative builds, meaning they are not relying on presales as much as before.
That's the main difference that we're seeing year over year. Morgan County is down even more significantly than Madison County, they're down 49.2%. Limestone County is more closely tracking with the overall area at 17.2%, down from 191 to 163 closings.
Median Sales Price & Percentage of List Price Received
Overall, the median sales price has stayed relatively flat over last year. If you look at all of north Alabama, it's an increase of 0.4%, $334,450 versus $333,000 last year. Huntsville is basically flat as well, it has slightly increased from $367,000 last year to $370,000 this year.
Interestingly, the Athens market has seen a jump from $359,000 last year to $370,000 this year, matching the median sales price of Huntsville. Athens has significantly increased in desirability for buyers, offering various attractions, excellent school districts, and an improved quality of life in the area. In terms of pricing, Athens is now just as popular as the Huntsville market.
Morgan County has also experienced a significant increase, with prices jumping from $259,000 to $295,000. This is particularly interesting given that housing sales in Morgan County have plummeted by 49.2%. However, the rise in prices can be attributed to the affordability factor, as Huntsville and Athens have become considerably more expensive. That means all other ships are going to be of rising with the tide and Morgan County is going to continue to see price increases. Another contributing factor is the substantial amount of new construction happening in the Priceville, Decatur, and Hartselle areas.
Let's jump into the percentage of list price received. This time last year, we were at 100.3%, meaning that most homes were selling slightly above their list price. Today, we are observing 99.1%, which is still quite remarkable. In a typical market, you would expect to see around 97%. We remain in a seller's market, with homes selling rapidly at an average of 25 days on the market and still fetching a high percentage compared to our list prices.
Housing Affordability in Huntsville, Alabama
To me, the big news revolves around housing affordability. Housing affordability continues to decline, and I recall just a couple of years ago when our scores were above 150 here in the Huntsville area. Now, housing affordability has dropped to 77. To provide a quick reminder, a score of 100 signifies that the median household income can afford a home within the median price range in our area. Unfortunately, that's no longer the case here in Huntsville. Last year, it was at 91, representing a 15.4% year-over-year decrease. Just two years ago, in 2021, it stood at 127. Townhomes also continue to experience a decline, with a decrease of 21.3%. This year, we are at 100 compared to 127 the previous year. Looking back at 2021, we reached as high as 162.
Affordability continues to get hit as prices stay high and increase in some of the rural areas like Morgan County and Limestone County. This impact is increased by the rising interest rates, which are nearing 8%. As we approach this 8% mark, affordability is likely to continue to be affected, and I anticipate that the percentage of list price received may decrease. Also, our median-priced homes may face challenges for a season as interest rates reach 8%.
Another factor to watch in Q4 is new construction. Many builders are currently offering incentives to encourage home purchases before the end of the year. Therefore, in Q4, we may witness different figures in terms of the percentage of list price received and possibly even the median sales price.
Housing Inventory & Housing Supply
A positive point to note is that the inventory of homes has increased by 16.9% year over year, with 1,579 homes compared to 1,351 in August 2022. It has doubled since 2021, which is also a good sign. However, we are still far from reaching what is considered a normal market. Typically, we see anywhere between 2,500 to 3,000 homes on the market in Huntsville. Currently, in the general Huntsville area, we have approximately half of that at 1,579 homes.
Housing supply has also increased, which is a positive sign reflecting the additional housing inventory we now have. Housing supply stands at 2.9 months' worth of supply. This metric indicates how long it would take to sell all the homes based on the current rate of sales if no new homes became available on the market. It would take 2.9 months to sell all those homes, compared to 2 months this time last year.
Despite the improvement, we are still considered to be in a seller's market. A balanced market is typically considered to be anywhere between 4 to 6 months of supply, with anything below 4 months being considered a seller's market. This classification is further supported by the fact that we're receiving 99.1% of the list price for homes, all of which point to a seller's market.
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Posted by Matt Curtis on