Huntsville Housing Market Report | September 2023
In the everchanging Huntsville, AL real estate landscape, the September 2023 Housing Report reveals some key insights. Let's take a closer look at how the slowdown in home sales is influencing average property prices. This impact varies across different areas, including Huntsville, Decatur, and Athens. We'll examine key metrics such as new listings, pending sales, closed sales, days on market, and the percentage of list price received. Additionally, we'll assess the Housing Affordability Index and its implications for professionals like nurses, police officers, and teachers in their quest for affordable homes. Lastly, we'll explore the dynamics of supply and demand, highlighting the importance of grasping the nuances of housing submarkets when making informed decisions in the real estate sector.
Average Sales Price
With home sales slowing throughout the Tennessee Valley, average sales prices have largely remained stable, especially in the Huntsville and Decatur markets. However, the Athens market stands out with a significant year-over-year drop in average sales price.
In Huntsville, the average sales price was $371,000 last year, and it only dipped by $1,000 to $370,000 in September 2023. The Decatur market has also seen relative stability, with prices going from $256,000 last year to $257,000 this year. The real story is in Athens, where last month, the average sales price was the same as in the Huntsville area. However, it has experienced a substantial decline both month over month and year over year. Last year, the average sales price was $356,000, but it dropped all the way to $328,000. On the surface, it may appear as a significant price decrease of over $40,000, but it likely resulted from lower average sales prices rather than homes selling for less. This was influenced by the sale of less expensive homes, especially with new constructions becoming available in this market around this time of the year. As we move forward, it's essential to closely monitor Athens in October and November to see if it can regain the momentum it once had in alignment with Huntsville in terms of average sales prices.
New Listings, Pending Sales, & Closed Sales
New listings have also decreased by 11% year over year, with 1,314 new listings in September compared to 1,477 last year. The significant aspect here is the multi-family market, which has experienced a notable drop of 25.6%. This emphasizes the need for more multifamily housing options in the Tennessee Valley, as they tend to be more affordable.
The solution to creating more affordable housing lies in increasing the housing supply. Therefore, the 11% decline in new listings is a logical outcome. Many potential sellers are currently facing a situation referred to as a "mortgage rate lockdown effect." This means that a lot of would-be sellers have locked in interest rates in the high 2’s or low 3’s and are not inclined or able to sell at this time due to the higher interest rates and the impact on their payments if they were to sell and buy again.
Pending sales in our area dropped to fewer than 1,000 for the first time in a while, marking an 11.3% decrease from 1,031 in September 2022 to 914 in 2023. Last September was pivotal, with rising rates impacting Q4 sales, and we're witnessing a similar trend in 2023, where sales are even lower than in 2022.
Closed sales have also declined by 22.4% year over year, with 1,323 closings in September 2022 dropping to 1,026 in September 2023. This aligns with the national trend, where annualized sales have dipped to about 4 million homes per year, a significant decrease from the over 6 million annual sales just a few years ago.
Days on Market & Percentage of List Price Received
As home sales slow, the days on market have increased, going from 19 days last year, which was an unusually low number, to 30 days now. Although this is higher than before, it's still significantly lower than what's typical in a regular real estate market.
The percentage of list price received has remained relatively steady over the past year, with 98.9% last year compared to 98.7% this year, which still indicates a seller's market on the surface. Typically, anything above 97% suggests a seller's advantage, as you'd usually budget at least 3% for buyer negotiations. However, this statistic can be misleading because it doesn't account for builder incentives like design credits, interest rates, fencing, and closing costs, which often exceed the typical 3% negotiation range. So, it's important not to put too much weight on this statistic, especially considering that many sellers, especially builders, are open to negotiation in the current housing market.
Housing Affordability in Huntsville, Alabama
As we've been reporting, the Housing Affordability Index in the Tennessee Valley continues to decline. Last year, we were at 91, but now we've dropped to 83, significantly below the scores we observed a few years ago, which were around the mid-100 range, approximately 150 or so.
A quick reminder: The housing affordability index uses a score of 100 to indicate that the median household income in our area can afford a home within the median price range. Unfortunately, with a score of 83, the median income can no longer afford the median or average home in our area. This poses a significant challenge, as many people, including nurses, police officers, and teachers, are finding it increasingly difficult to afford homes in our area, which could be a substantial issue for Huntsville's future.
New Listings & Months of Supply
We've seen closed sales drop by 22.4% year over year, which might suggest that inventory is piling up in the Huntsville area. However, it has only increased by 7.9%. This is largely due to a decrease in listings, which are down by 11%, influenced by the affordability index and low locked-in interest rates. So, the current inventory stands at 3,086 homes compared to 2,859 homes at this time last year in the Tennessee Valley.
Furthermore, the demand for supply has also risen. We had only 2.4 months' worth of supply last year, and now we're at 3.1 months' worth of supply. Technically, this still falls within the seller's market category, as anything below 4 to 6 months is considered a seller's market, while anything above that is considered a buyer's market. Nevertheless, we are swiftly approaching a more balanced market.
Know Your Housing Submarket
As is everything with real estate, it's all about location, location, location. Homes in California vary in price and momentum compared to those here in the Huntsville area. Even in Huntsville, the dynamics are shaped by the price point, school districts, and the home's location.
For example, homes priced above $800,000 have 216 active listings with only 26 sold in September, resulting in almost 9 to 10 months' worth of supply in that submarket, which qualifies as a buyer's market in that price range. On the other hand, in the range of $150,000 to $199,000, there are 195 active homes versus 112 sold in September, indicating less than a month and a half of supply, making it an extreme seller's market in that price range.
When navigating the market, it's crucial to engage with an informed realtor who can analyze the data and guide you in understanding the specific submarkets, enabling you to make informed negotiation offers to sellers.Posted by Matt Curtis on