We are taking a look back at the November home sales numbers to see what home buyers, sellers, and investors should know about the Huntsville Housing Market.
The bottom line up front is that we are in an even stronger sellers market than we have been these past few months. The number of sales is still being constrained by the lack of inventory and that inventory is continuing to decrease. We are seeing a normal seasonal slow down in the rate of new listings. Thanksgiving definitely slowed down new listings and the supply has been made even tighter.
Supply of Homes
Measuring the supply of homes on the market is pretty straight forward. First we look at the count of homes on the market.
At the end of November there were 709 homes on the market across Madison Couty according to the data provided on MarketStats (provided by HAAR and Valley MLS) this is the lowest number in the past 3 years. The active listings are down 14.5% from last month and 39% from last year. Looking back to 2001 from data from The Alabama Center for Real Estate there are has not been inventory this low in the last 20 years.
The next thing to look at is the rate of new listings for homes.
According the MarketStats we had 671 new listings in November across Madison County. Which is a 12.9% decrease from last month and a 14.7% increase since November last year. Looking at the past few years this decrease seems a bit less than the past couple years. The typical trend is that the lowest number of listings comes in December each year so we expect the listings to slow down a little more before they pick up after the first of the year. The trend shows about a 20% decrease from November to December so we expect approximately 550 new listings this month.
When we look at the daily new listings, we see that the listings stayed pretty steady through the first three weeks of November with the 28 day moving average staying in the 23-25 range and the 7 and 14 day oscillating a bit from 21-27 per day. Then the weekend before Thanksgiving there was a distinct slow down. December should be similar where early in the month will represent a majority of the listings and around Christmas and New Years there will be a slowdown.
Demand is more difficult to measure as there are not good forward looking metrics to show what we expect demand to look like and some of our metrics are really looking back 45-60 days so not exactly real time data. So we can look at what sales closed this past month, how many homes went under contract last month, and the time on market for those sales. These each give us a picture of demand in the market over the last month.
Looking at the past three years of closed sales we are seeing an increased volume this year and that trend continues through November with 657 closings. This is a 14.4% increase from last year and a 14.9% decrease from last month. Overall the annual trend is that the volume of sales increasing has continued and seasonally we expect a slowdown this time of year. So nothing from this metric shows a change.
Pending Sales is a good metric for looking at demand as it is closer to what is happening today, but around 1/7 of houses that go under contract do not close so there are chances these fall through. Looking at the past three years we see there is a distinct seasonality to the trend but it is also increasing. There were 676 pending sales in November this is an 6.6% decrease from last month, but a 19.4% increase from last year. The decrease since last month and the increase last year is consistent with the seasonal slowdown but overall increase in market volume. If the market continues following the trend we would expect approximately 580 pendings in December, but with the expectation that only 550 homes will be listed I imagine there will be a further decrease in volume of pending sales and it will be close to the number of new listings.
Looking at the daily pending metrics, it looks like they have been remarkably consistent over the past few months. This continued through the first three weeks of November with the 28 day moving average staying between 21 and 22. During Thanksgiving there was a noticeable slowdown in Pendings as would be expected. I expect the rate to stay pretty steady for the first few weeks of December and then a slowdown for the last week or so around the holidays.
Another thing for us to discuss when looking at demand is the mortgage interest rate. Above is the Freddie Mac Primary Mortgage Market Survey. This survey has been kept since 1971 and each week they gather data to track the average commitment rate and fees for a primary mortgage (Check out the survey for more details and definitions), The trend shows us that throughout November were among the lowest mortgage interest rates in the time period we are looking at and it turns out we have among the lowest interest rates in history. This definitely impacts demand as buyers are willing to pay a higher price when they know that the interest rates will keep their monthly payments where they are comfortable and the long term cost of the home down. So this indicates we should expect an increase in demand.
Finally for while analyzing demand we can look at the number of days that a listing is staying on the market. I prefer to look at the median as there is less noise created by a single listing. The trend here is a steady decrease in the time on market for the past 4 years. The low that we are currently experiencing is 3 days as the median value and it has been holding strong there since June. This is very low as it means that half of the homes on the market are selling in three days or less.
Now we are combing the supply and demand metrics to see what the market looks like. First we will look at the Months of Supply or the absorption rate. It is looking at the current inventory and the past months rate of closings and saying “how many months until we run out of inventory if we do not get any more?” Currently we are at an all time low of 1.0 months of inventory. For a baseline, 5-6 months is considered a balanced buyers and sellers market, so we are in a very strong seller’s market.
Next we look at a daily chart that shows how many new listings minus how many homes went pending each day. The moving averages give an idea on if we are increasing or decreasing how many listings we have available. Throughout November there was a pretty steady number hovering just over an increase of 2 per day until November 21 when there was an abrupt change and all of the moving averages fell the week of Thanksgiving in to the negative range.
Finally we look at the price trend. This is the monthly median sales price since January 2017. The median price in November was $250,000 this is the essentially the same since August and a 9.2% increase from last year. It is interesting that the price increase has paused at $250,000. This seems to be driven by the psychology of the round number. I expect it will move above that soon. There has been as consistent increase in price for the past several years and based on everything we have looked at hear it does not show any signs of changing in these numbers.
For Buyers: The mortgage rates are very attractive right now among the lowest in history, so it is nice to be able to get in to a home with a low interest rate. Prices however are higher than they were even a year ago. The question “Is it a good time to buy?” is always a challenging one to answer. The bullish case is that North Alabama’s economic indicators such as employment, foreclosures, average income, etc. all point towards a healthy local economy. The outlooks for job growth are very good and do not appear to be significantly impacted by the pandemic, so that would say that prices should continue to increase with the local economy. The bullish case is that prices have increased already and are due for a correction and that economic indicators are looking backwards and there is no sure thing going forward. I personally lean more towards the bull, but you need to be comfortable with the local economy before you decide if now is the time for you to buy. This is a tough market to buy in so if you decide that now is a good time for your family go in ready to be patient and aggressive. Patient in how you wait for the right house to come around and aggressive in that there are frequently multiple offers and being aggressive in how much you offer and how friendly terms you can offer a seller will help you get the house you want. One of the best things you can do to prepare to purchase is to save some more money. The more cash you have the more flexibility you will have during the negotiation process. There are around 19 houses going on the market each day so there is inventory arriving you just have to be in a great spot to get it.
For Sellers: It is a fantastic time to sell. Prices have come up quickly and if you are looking to sell there has never been a time where you will have more leverage in negotiations or less competition for buyer’s attention. There is not much more to say there are lots of buyers and few sellers so now is a great time to get top dollar for your house.
For Investors: There is a good deal of competition for investable properties. Homes in good condition that rent well go very quickly, so be aggressive and know what you are looking for. The best opportunities are probably in flipping to retail buyers or in buy, renovate, and rent long term deals. The extra work required for these decreases the competition a bit so there are opportunities out there. There is an increasing number of out of town investors looking at our market which indicates it is an attractive market.