Overall, Alabama real estate ended 2017 relatively strong. Demand for residential real estate in Alabama Statewide rose 9% in December 2017 compared to 2016. Prices also rose 10% over the prior year level. The increasing demand has resulted in significantly reduced supply over the same period last year; overall statewide the supply of homes for sale is down 10%. The months of available housing supply varies by metro, urban and rural areas in our state. Metro areas in Alabama report 4.4 months of supply, midsize markets report 6.4 months of supply, while rural areas report 7.7 months of supply as of December 2017.*
What does this means to you as a seller? The months of supply relates to whether it is a buyer’s or seller’s market. The market is considered to be in balance at approximately 6-7 months; but under 6 months it is considered a “seller’s market” and if supply exceeds 7 months it is considered a “buyer’s market.” When you are in an area with a smaller supply of homes on the market, there is overall reduced competition for the sale of your home–so not only are you more likely to sell your home, but you are more likely to get a good price and prices may be expected to increase. When the supply of homes is smaller and you are a home buyer, you will find fewer choices and higher prices. If you’ve been thinking about owning a home, you may not want to wait.
*Data obtained from The University of Alabama, Culverhouse College of Commerce, Alabama Center for Real Estate. Data in the chart represents year over year change (% change of current period (Dec 2017) versus same period last year (Dec 2016)).
But what about Central Alabama?
We all know that real estate trends vary by region and by individual community. This month and next we will look at overall Central Alabama trends. Over the year we will look at what is going on in the particular communities of interest.
2016 to 2017 Montgomery Area Real Estate:
Data obtained from The University of Alabama, Culverhouse College of Commerce, Alabama Center for Real Estate. Data in the chart represents year over year change (% change of current period (Dec 2017) versus same period last year (Dec 2016)).
The month of December 2017 in the Montgomery Market showed a 12% increase in the number of homes sold (demand) over the same period last year (December 2016). Supply was also reduced by 8%, not quite as high a reduction as statewide. However, in the Montgomery area, home prices were up approximately 5%, significantly less than the statewide average increase of 10%.
Data from the Montgomery Area Multiple Listing Service shows that closed sales of residential homes were up overall in 2017 almost 2% from the previous year (2016). That represents an increase of just short of 100 units over the course of the year. What is most interesting is that that average price of sold homes in 2017 has risen over 5% from 2016 prices, an increase of nearly $9,000.
Based on the December data and the yearly trend from 2016 to 2017, the Montgomery Area market as a whole is not appearing as robust as the statewide data suggest. Although the number of Montgomery area homes that have been on the market for over a year have gone down slightly in 2017 compared with 2016, most homes are still on the market up to 90 days. In fact, only about 24-25% of homes sold in our area were sold within 30 days in 2016 and in 2017. As of December 2017 reporting, the Montgomery market was considered “in balance” with an approximately 6 month supply of homes.*
So why do prices appear to be on the upswing despite relatively small changes in volume of closed sales and unremarkable changes in days on market and a relatively “in balance” market? Review of the data suggests the impact of an increased number of homes selling in the $180,000-$499,000 price range with a significant decrease in the total number of homes selling for under $50,000. Just where are these homes? Are the more expensive homes new construction or preowned? Is it a trend? Although the supply of homes has gone down and appear to be in balance, what is the trend in the balance of supply and demand and is that affecting prices? We will look a little closer next month, so stay tuned. We will also look more into what is in store for 2018!