The economic fallout of the coronavirus pandemic continues to unfold. The impact to the nation’s job market has been quick and historic as the unemployment rate spiked to a record 14.7% and payrolls declined by 20.5 million in April 2020.
Concerned by fast-rising unemployment, many lenders have become more conservative to protect themselves from forbearance. While mortgage rates hover around record lows, it has become somewhat harder to qualify for a mortgage during the pandemic. Lenders have raised their credit score qualifications while also requiring larger down payments. Some “risky” borrowers can still qualify, but generally pay a significantly higher interest rate than a “less risky” borrower.
There is concern that reduced loan activity could make home sales decline even further. In Alabama, a snapshot of the impact of the pandemic to residential markets can be seen, to some degree, in the chart below. Please note, however, that the chart does not reflect all metro areas in the state as some have not yet reported April data. Also, there are many other factors and data points beyond closed sales and median sales price, but analyzing trends in these does provide market insight.
While sales were quite strong in the first quarter (pre-pandemic), several markets have reported declining April numbers. The good news, however, is that sales prices have largely remained stable. Note: data for all markets will be available on May 21, 2020, with ACRE’s statewide April report.
Note: This chart shows closed sales data from seven of the state’s 14 metro areas during April 2020. All data will be available by May 21, 2020.
April sales declined 13.6% Y/Y in Birmingham-Hoover. This is significant as the area is the largest residential market, by far, in both population and closed sales activity (16,228 sales in 2019 versus 8,150 in Huntsville). It’s also the largest year-over-year decline in sales activity since June 2011 (-14.5%). On a favorable note, home price appreciation continued to trend upwards as the area’s median sales price increased 9.9% Y/Y in April. Sales averaged 29 days on market, although a recent report from Realtor.com showed a longer sales cycle (homes selling slower than this time last year) due to the pandemic.
Sales activity also declined in Baldwin County in April, down 22.8% year-over-year. The area is unique as a significant amount of sales activity occurs in the secondary home or recreational market (many of which are condos), while it also has a growing population of full-time residents and lots of new construction activity as a result. Similar to Birmingham-Hoover, home prices remained stable as the median sales price increased 4.4% Y/Y. Properties sold in an average of 87 days, three days faster than April 2019.
With the March sales data largely unaffected by the pandemic, we are in the “first month” when measuring the impact of the coronavirus with closed sales activity. Since April sales represent contract signings primarily from March (pre-pandemic), we anticipate that the May sales data (contracts signed in April) will better reflect the impact to residential markets. The Center’s statewide report for April 2020 will be available May 21, 2020, so check back in then for more information regarding the impact to residential markets. May 2020 sales data will be available June 22, 2020.
