Posted by Matt Curtis on Friday, January 27th, 2023 12:09pm.
Home sales are down 32.2% year over year in our local Huntsville, Alabama real estate market. Housing affordability and the mortgage rate lockdown effect are continuing to push the number of homes sold down, we’ll look at what effects these and other factors affected the Huntsville housing market in December. If you’re looking to buy or sell a home in Huntsville, AL, this information can help you make the best decision based on your situation as we head into 2023.
Sales have dropped 32.2% year over year in our local Huntsville, Alabama real estate market. Sales are down for two primary reasons.
The first is affordability. The Huntsville Housing Affordability Index is down from 119 last December to 82 this December. A score of 100 means that the average income in our area can afford the average home. A score of 82 means housing is becoming less affordable and fewer people can afford homes here in Huntsville.
The second is what we call the mortgage rate lockdown effect. The mortgage rate lockdown effect is that essentially during the pandemic, we had historically low interest rates starting in the 2’s or 3’s so a lot of homeowners locked in interest rates in the 2’s and 3’s and simply aren't motivated enough to sell their homes in a higher interest rate environment.
The average sales price is up 3.2% year over year to $328,236 versus $318,840 last December. So why are prices not coming down? They're not coming down because new listings are also down 27%. Sales have dropped 32.2% and new listings have dropped 27%.
There's just not enough inventory to push prices down. There are 720 new listings versus 986 a year ago. We also have pending sales that are in line with new listings with 716 pending sales this year versus 1,028 last December. We had 720 new listings come on the market with 716 pending sales, so supply and demand are balanced.
When supply and demand are balanced, you have average appreciation rates in our area.
Days on market and supply are both up, but they're still way below our averages here locally. We're at 28 days on market on average which is up from 17 days year over year. Still, 30 days is a very quick time to sell a home.
The other thing is supply. We're at 2.5 months' worth of supply versus 1.1 months of supply a year ago. Anything that's below four months' worth of supply is considered a seller's market. That balanced market, really that healthy market, falls between 4 to 6 months so being at 2.5 months we're still below where we want to be in terms of supply.
We do have some good news for buyers, percentage of list price received has come down. Basically buyers are able to negotiate off of list price in many cases in today's market. A year ago that percentage was at 100% of homes selling at list price, if you look back beyond a year they were north of 100%.
Now percentage of list price received is at 97.7%. The key metric that I look at for a balanced market is 97%. A lot of buyers need some closing costs and some slight negotiations so 3% is kind of that key metric when you go south of that, that means the scales have really tipped towards the buyer side. If you get to 95% or 96%, you're likely in a declining market. 97% is the key and I think we'll be there this spring.
In summary, housing affordability and the mortgage rate lockdown effect continues to be the keys in this market and the reason that home sales are down. There are a couple of things to be looking out for.
First, is if we hit interest rates of 5.5%. Last year as rates were rising and got to 5.5%,that was kind of the inflection point. Home sales were still happening at high levels and homes were selling very quickly at 5.5%. When we went north of that, that's when the market started to slow down in terms of the number of sales.
The second thing that you should be looking out for is that we have 29% of renters in our market that can afford the median price home in our market. There's a lot of renters on the sidelines. Look for interest rates around 5.5% to bring these renters off the sidelines. Then we’ll start to see more above-average volume in terms of the number of sales and home prices will start to appreciate again in this market.
If you're looking to buy or sell a home in 2023, send us an email at moving@mattcurtisrealestate.com or contact us here, we look forward to helping you achieve your real estate goals in 2023.