Huntsville, Alabama Housing Market Update
Real estate in Huntsville, Alabama has been growing steadily over the past decade. Read this article to learn more about the current state of the Huntsville housing market industry.
With a population of nearly 500 ,000 people, the Huntsville, AL metro area is home to NASA’s Marshall Space Flight Center and Redstone Arsenal. In recent months, Huntsville has seen an increase in new construction homes, a shift in interest rates, and changes in the real estate market. Several factors are affecting this month's housing market update, and the details are outlined below.
Federal Reserve Raises Overnight Rates
The Federal Reserve has raised our overnight rates again by 0.75% which is one of the most significant factors in the real estate market shift. Most would think this would cause an increase in mortgage rates. However, this has not been the case. We actually had the biggest drop in mortgage rates in two years at 31 basis points, which is .31 percent over this week.
The reason for this decrease in mortgage rates is due to the market’s expectation that the Federal Reserve would raise interest rates. There was also speculation that the Federal Reserve was going to be more aggressive as they moved to the full basis point. The federal reserve interest rate hikes have already been baked into the interest rates here in Huntsville so mortgage rates went down when the hike was less than previously expected.
We’re Still in a Seller’s Market
Currently, interest rates are lower and housing inventory is starting to increase. However, Huntsville, AL is still in a seller's market since inventory is still at a little bit less than two months worth of supply. A balanced market is when there is 4 to 6 months worth of supply and a buyer's market market is when there is more than 6 months worth of supply.
Locally, we are noticing a couple of things with more real estate supply and interest rates stabilizing. There are fewer offers coming in on homes but we are still seeing homes sell quickly, with multiple offers, and still selling above list price. Also, more buyers are including inspection clauses and getting repairs negotiated during this process. This is a positive sign for buyers.
New Construction Opportunities & Builder Slowdown
Another factor affecting the local real estate market deals with a shift in builder strategy. This shift has created an opportunity for buyers of new construction. Over the last couple of years, a lot of builders have been burned by rising material costs. Builders had a lot of fixed rate contracts (pre-sell contracts) that caused the builders to sell with no profit due to the increased cost of materials. We are now seeing builders shifting their strategy from a presale type market to a spec home market. Builders build the homes and then price them towards the end of completion since they know what the cost of the home will be.
The challenge for builders is that we have slowing demand in the market. Because of this, we should be seeing additional supply in the new construction market over the next six months as this inventory becomes available. Buyers should take this opportunity to capitalize on the incentives builders are offering right now. Buyers need to use this short window to capitalize on builders slowing down their speculative building in the future months since interest rates have risen from historic lows.
Builder confidence is actually down nearly 18% month over month and over 31% year over year. This is down from a high of 84 to 55. This is important because builder confidence closely models home sales and the inventory that comes on the market. As builders slow down the number of homes that they're building, it’s likely that our 5.5 million home deficit continues to increase.
Locally, home sales were down 9.5% year over year. This is a misleading stat because the housing market is down 9.5% from historic highs. We're still approximately two times the number of sales that we had just a decade ago in 2012.
Here are Matt’s recommendations:
New construction is on sale right now. If you're in the market for a new home, now's a great opportunity to take advantage of the incentives builders are offering.
It is very possible rates will continue to increase over the next few months. We’re in a short window to capitalize on a little bit of a dip in the interest rate market. I think after the November elections and beyond, the nation will likely see a fall in interest rates again. If rates don’t fall by November, it is very possible they will fall within the next 12 to 24 months. The Fed says they want to lower rates over the next couple of years. Lock in your home price and rates today, then look to refinance once rates go down.