Posted by Matt Curtis on Friday, November 18th, 2022 3:54pm.
Housing affordability continues to be the main spotlight in real estate right now. The final October reports are in for the Huntsville, Alabama area housing market, we’ll look at all the key stats and how they might affect housing affordability moving forward. 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.
One of the biggest keys right off the bat is new listings. We are down 12.7% year over year for October. New listings are down almost 200 listings year over year in just a single month. If you extrapolate that out to a year, you're looking at over 2000 listings lost on an annualized basis.
People are asking, “In 2008, we had a big price correction why are we not seeing that now”? We've had prices run up and we've talked about how a lot of that has to do with dollar devaluation, lack of supply, and all those challenges. Now that we have higher interest rates and higher prices, the logic would expect prices to start to come down. The big thing is we still don't have enough supply.
The Fed is creating less demand by raising interest rates and lowering the number of people that can afford to borrow and find a home right now. But what a lot of people are doing is they are opting out on selling their home because a lot of folks have interest rates that start with a two or three and they are less motivated to make that move right now. And so with less supply, less demand, they're still keeping prices fairly stable here in the Huntsville market.
Pending sales are a leading indicator of what's going to happen over the next month and two months, as most homes are under contract in that 30 to 60-day timeframe. Pending sales were down 28% year over year, which is to be expected since there's less demand out there and fewer listings on the marketplace so that's going to affect the next category.
Closed sales in December are going to continue to decline. Closed sales for October were down 22.4%.
Days on market is currently 22 days, up from 17 in October 2021. As you can imagine, there are fewer homes but the inventory is sitting longer so days on market is going in the right direction. It's lingered around 12 days on market over the last couple of years, that number being up 29.4% year over year is a good sign. That's kind of one of those lagging indicators, as homes start to close they start to calculate that number. I would expect that number to increase dramatically over the next 1 to 2 quarters and get back to more of a historically healthy number.
The median sales price is up 9.8% to $305,000 and our average sales price is $343,817. I expect that number to stay fairly flat in 2023 and we'll talk about 2024 in some upcoming videos.
Percent of list price received doesn't look like a big difference on paper, it's a 1.4% change from 100.2% to 98.8% year over year. But this is actually a big, big thing for buyers. It's obviously a big thing for sellers as they're not getting as much value for their home right now but why this is so big is it's allowing buyers to start to negotiate.
The other thing is the stat is a little misleading because it's just talking about the sales price, it’s not factoring in other concessions or negotiations such as closing costs, home warranties, rate buydowns, and those types of things. That number is actually bigger than it’s showing and is a lagging indicator as well so I would expect that number to continue to drop.
A healthy number is in the 97%-98% range and I do expect us to see that number in 2023. That will actually help a lot of buyers, especially first-time homebuyers, that may have saved up for a down payment but may not have saved up enough money for closing costs. So that becomes a very important thing to be able to get more buyers into the marketplace by being able to offer that concession.
That's a good sign for the overall health of the marketplace. It was really unhealthy when you could only buy a $250,000 or $300,000 home by paying cash and paying $40,000 above the list price; it just locks too many potential buyers out of the marketplace.
The housing affordability index had a huge drop, 35.7% year over year. That's been one of the bright, shining stars and what's helped Huntsville grow so much is our housing affordability. Obviously, as we continue to grow we offer more entertainment districts with MidCity, Providence, Stovehouse, Town Madison, and those types of areas. There are more things to do. There are more jobs here. Unfortunately, like other growing cities, that number will likely continue to decline.
We're now at 81 for single-family homes. Quick refresher, a score of 100 means the average income can afford the average home; we're now below that. The average buyer out there cannot afford to buy the average home in Huntsville, which is a challenge, especially considering that we have above-average income in our marketplace.
Expect to see builders make a shift over the next 12 months to a lot of more townhome-type options because townhomes are still above that 100 score index. As you see a lot of cities grow, you see a lot of shifts towards townhomes and condo-type projects for affordability reasons. That's something that our marketplace just hasn't had enough inventory of and a lot of that's just been because single-family housing has been just so affordable in our marketplace so expect to see that change.
Unfortunately, the other change that I'm really seeing in the marketplace that's not showing up on this list yet but will be showing up in the new listings category in 2023, is builders shifting from a lot of new construction homes for sale to selling those homes for rent. Build for rent is a big category that's coming to Huntsville. As opposed to just building a neighborhood and selling those homes off one by one to individual buyers, a lot of builders are shifting that strategy to selling the entire neighborhood to an investor and those homes turn into rentals.
That's going to be a big, big theme going into 2023 that's going to affect the supply and marketplace in Huntsville, which will likely push housing prices up in 2024 in my opinion.
Housing Supply has gone from 1.3 months to 2.5 months. That’s a lagging indicator, I expect that number to continue to go up over the next several months. What 2.5 months means is if there were no new homes that came on the market, based on the current absorption rate, it’s how long it takes to sell the entire inventory out there. We really want to be between 4 to 6 months, that’s considered a balanced market. Technically, we're a seller's market. Of course, it really depends on the price point, we're still seeing really hot seller markets in some of the lower price points and then we're seeing the higher prices kind of sit on the market being at even a buyer's market at some of those higher price points.
That is our market update for October. Expect to see a little bit of a bump in November because we've had interest rates drop and I think that's going to be a short-term phenomenon based on what the Fed is saying. I think we're going to see a little bit of a bump in November and then expect to see sales kind of level back off in December.