Huntsville, AL Housing Market Update | September 2022
In the September Housing Market update for Huntsville, AL, we’ll take a look at housing affordability, housing inventory, and what to expect for the rest of 2022. 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.
Huntsville, AL Housing Affordability
Affordability continues to be down. Single-family homes are becoming less affordable with the housing affordability index down from 129 this time last year to 90 for single-family homes. Anytime affordability gets below 100, it means that the average income in our market cannot afford the average price range home in the Huntsville market. The good news, however, is that townhomes are still relatively affordable at a 122 rating, which means we're likely to get more townhome construction projects in the Huntsville, AL market over the next several years.
There are a couple of reasons why the housing affordability index is going down in Huntsville:
1. Rising Interest Rates
Currently, rates are above 6% right now versus the historically low-interest rates that were at 3% or below just a few months ago.
Prices have continued to go up year over year. Currently, the average sales price in Huntsville is $367,000 compared to $330,000 this time last year.
List-to-Sale Ratio Declining
We do have some good news about the list-to-sales price ratio. Last year at this time, we were looking at an average percent of list-to-sales price of 101%. Homes listed at $300,000 were actually selling for $303,000. Fortunately, now we're below the 100% mark at 99.4% which is a good sign. That means home prices will start to moderate over the next several months.
My personal experience has been that an average list-to-sales ratio is about 97%. That's the percentage that we want to see this market get to over the next several months and even into the next year.
Huntsville, AL Housing Inventory
Housing inventory is going to help with affordability going forward since there are more homes on the market and fewer homes being sold. Inventory has more than doubled year-over-year in Huntsville. We hit historic lows at 662 available homes last year, now we're at 1,327 active homes. It’s still not enough inventory, but we're definitely headed in the right direction. Home sales are down 9.9% from 861 homes sold in August 2021 down to 776 homes sold in August 2022. This is still up from previous years, but we are down from record highs.
The good thing is that with more homes on the market and fewer homes being sold, that is going to likely help with that list-to-sales price ratio and continue to moderate home prices here in the Huntsville market.
Average Days on Market
One stat that hasn't caught up with the market yet is average days on market. Average days on market have actually fallen year-over-year from 13 days on market to 11 days. Once some of this active inventory gets cycled through and sold, the average days on market is going to continue to increase.
We actually have 3.3 months worth of supply in our market. Anything below four months is still considered a seller's market, but that 4 to 6 months supply is where you really want to be for a balanced market, neither a buyer's market nor a seller's market. We're getting really close to having a balanced market here in Huntsville.
What to expect for the remainder of 2022
So in conclusion, home prices are likely to moderate over the next several months and potentially even into the next year. The reason for that is higher interest rates as well as would be buyers potentially sitting on the sidelines watching the headlines of the real estate news.
There are a lot of headlines out there talking about a potential real estate crash, but that is very unlikely at this point. That’s because there are so many people that have locked in interest rates and have a ton of equity in their homes. The real estate crash in 2008, the one time that we've had a real estate crash in the last hundred years, was because people were upside down on their mortgage and how much they owed. That is not the case this time.
We also still have a 5.5 million home deficit in this country, which is not likely to go away. It's actually likely to get worse with this downturn because a lot of builders are starting to pull back on inventory because they got hit with extra inventory right now and they don't want to continue to carry that risk moving forward.
As interest rates decrease, we're not likely to have enough new construction supply in the market to satisfy that demand, especially from millennials. So my best advice for you right now is if you can take advantage of this market, especially new construction. A lot of builders are very motivated and even offering discounts right now. This is a unique window of opportunity to buy new construction. So lock in those new construction prices, get the interest rate of whatever the market rate is today, and look to re-lock that rate as interest rates are likely to improve over the next 1 to 2 years.
Posted by Matt Curtis on