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Huntsville, AL Housing Market Update | November 2022
Home sales are down 27% year over year, yet prices are still up 8.7% year over year. 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 had on the Huntsville housing market in November. 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.
New Listings, Pending Sales, & Days on Market
New listings are down 16% year over year, which is due to this mortgage rate locked down we’re experiencing. In fact, there are a lot of sellers that have rates starting in the 2’s or 3’s which are ultra-low interest rates, and they just don't have enough motivation to sell in this market to get a higher interest rate.
The other thing that could affect listings in 2023 and could push that number down even further is new construction. We've had this glut of extra new construction inventory that's short-term and has to work its way through the market, but with that, builders are being very cautious about adding new inventory into the market in 2023 which could push down the overall supply. Another thing to really keep a close eye on, that a lot of people aren't aware of, is we have a transformer crisis in our community. A lot of builders that are trying to put new lots and new home sites on the ground, simply cannot do that or it's being delayed due to the lack of supply of transformers.
Pending sales are down 28.1% off of record highs a year ago, which is in line with a lot of the rest of the country. I was just at a conference where they were saying 30% nationally. I expect that number to continue to decrease in 2023 as we potentially have higher mortgage interest rates, continue to experience this mortgage rate lockdown effect, and also new construction slowdown. We're potentially going to see a volume nationally of around 4 million homes sold, which is off from a high of above 6 million homes.
Days on market in the Huntsville area is up to 24 days, which is still a very low number. I'd expect to see that number continue to rise in 2023.
Average Sales Price & Percent of List Price Received
Our average sales price in the North Alabama market is coming in at $325,000, but in the Huntsville market, it's still at about $365,000. I would expect to see that average price come down a bit in 2023 and the reason for that is higher interest rates. That's going to push a lot of buyers into lower price points so the majority of the sales are going to continue to push down into the average price point and below, which will likely drag down the overall average price as fewer luxury homes are sold in 2023.
The percent of list-to-sales ratio is 98.3%, which is great news for buyers as it's been above 100% for the last couple of years. Instead of a seller expecting to receive a full-price offer or even above the list price, there's actually some negotiation room. This is great for buyers as they are now negotiating closing costs and discounts on their homes. It's also really helping a lot of first-time home buyers and millennial-type buyers get into their first home because they were having a hard time competing against all-cash offers where they had to go $25,000 or $30,000+ above list price and come out of pocket above their down payment where simply a lot of first time homebuyers didn't have enough cash to compete. Having a market that's a little bit more balanced where first-time buyers can negotiate closing costs is a healthy thing.
I would expect that number to get to the 97% range because that's really more considered a balanced market. If we get below 97%, that would be a sign that we're starting to decline in this market.
Housing Affordability & Inventory
Some of the biggest news in this market is that housing affordability is down to 82, which is down 34.4% year over year and is down from about 200 just seven years ago in 2015. The reason this is so important is that now with a score of 82, the average income in our area can no longer afford the average home in our area.
That puts a lot of stress on the community when a police officer or teacher cannot live within the community where they work and they have to commute in and live outside of the community. It’s not a positive thing for our community where that affordability is down. I would expect to see more townhomes and condos coming into the market in 2023 and 2024 to help with that affordability.
The good news for buyers is that inventory is up 75.9% year over year, which is up from record lows. We're up to 2,939 homes on the market. We're still sitting at only 2.6 months of work of supply. That means that the current rate of sales with the inventory that's on the market, to sell every home on the market assuming the same rate of sales and no new homes available on the market, that number is sitting at 2.6 months.
That's still considered a seller's market. A balanced market is considered 4 to 6 months. Look for that inventory to continue to increase in 2023. The challenge is going to be the mortgage rate lockdown effect and how many sellers actually put their homes on the market. The other thing to note is inventory is still way down, in 2015 we averaged about 6,000 homes on the marketplace right now. We're still only about half of the typical supply that we see in this Huntsville market.
If 2023 is your year to buy a new home or sell and buy, contact us today and we’ll be happy to look at the numbers and talk you through your particular situation to see if it's the right move for you.
Posted by Matt Curtis on
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