Alabama home sales decline as anticipated in May 2020
Sales: According to the Alabama Association of Realtors, May home sales in Alabama decreased 15% year-over-year from 6,392 to 5,434 closed transactions. Following seasonal trends, sales increased 2.5% from April. Sales are now down slightly (-0.2%) year-to-date, and are likely to decline in the months ahead due to the growing economic impact of the COVID-19 pandemic. For additional context, May sales were 4.8% below the 5-year average. Two more resources to review: Quarterly Report and Annual Report.
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Inventory: Homes listed for sale decreased 22% from 21,851 listings one year ago to 17,042 in May. Months of supply dropped from 3.4 to 3.1, reflecting a market where sellers generally have elevated bargaining power.
Pricing: The statewide median sales price in May was $185,046, an increase of 7.1% from one year ago and an increase of 1.4% from April. The differing sample size (number of residential sales of comparative months) can contribute to statistical volatility, including pricing. ACRE recommends consulting with a local real estate professional to discuss pricing, as it will vary from neighborhood to neighborhood.
Homes sold in May averaged 86 days on the market (DOM), 2 days faster than one year ago.
Forecast: May sales were 988 units or 15.4% below the Alabama Center for Real Estate’s (ACRE) monthly forecast. ACRE projected 6,422 sales for the month, while actual sales were 5,434 units. ACRE forecast a total of 25,961 residential sales year-to-date, while there were 25,069 actual sales through May, a difference of 3.4%.
NAR commentary: According to the National Association of Realtors (NAR), existing home sales nationwide fell 9.7% during May (seasonally adjusted annual rate). This marks a three-month decline in sales activity due to the pandemic. Sales prices, however, remained somewhat stable as the nationwide median sales price increased 2.3% Y/Y, extending the streak of year-over-year price gains to 99 consecutive months.
When addressing slowing home sales, Lawrence Yun, NAR chief economist said: “Sales completed in May reflect contract signings in April and April – during the strictest times of the pandemic lockdown and hence the cyclical low point. Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”
Yun added that ““New home construction needs to robustly ramp up in order to meet rising housing demand, otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”
ACRE commentary: Closed sales data from May shows that total residential sales declined 15% year-over-year. Sales prices, however, increased 7.1% Y/Y in May. Inventory (properties listed for sale) was tight before the pandemic, and inventory continues to be constrained as listings declined 22% from one year ago. In the months ahead, sales activity is likely to slow when compared to the prior year (Y/Y decline in sales) due to the growing economic impact of the pandemic. While sales prices were somewhat stable through May, they could decline slightly later in the year if demand continues to soften. Pricing dynamics driven by the law of supply and demand are always at work moving toward or away from market equilibrium (6 months of supply) - where buyer and seller have equal bargaining power. In May months of supply was at 3.1.
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The Alabama Residential Monthly Report is developed in connection with the Alabama Association of Realtors.