While total residential sales in Alabama decreased 15% year-over-year in May, new home sales increased 7.2% Y/Y from 795 to 852 closed transactions. The median sales price increased 10.6% from one year ago and 2.5% from April. While there are fewer new construction listings than this time last year (-2.6%), inventory is significantly tighter, relatively speaking, in the overall market as listings across the state (resales and new construction) declined 22% Y/Y in May 2020.
New home sales represented 15.7% of all residential sales in May, up from 12.4% one year ago.
Thanks to population and economic growth in recent years, a significant amount of new construction activity in the state takes place in the Huntsville area (Madison County). New home sales represented 33.1% of all residential sales during May, well ahead of the statewide average of 15.7%. Even with a significantly smaller population than Birmingham, Huntsville led the state in new construction sales with 226 closed transactions. Sales increased 16.5% from one year ago, and 999 new homes have been sold in the area year-to-date, an increase of 26.9% from 2019. Median sales prices have been somewhat stable, rising 0.4% from one year ago and 1.9% year-to-date.
New construction sales in the Birmingham area increased 1.1% from 185 one year ago to 187 in May. The slight Y/Y increase brings the year-to-date total to 926 closed transactions, an increase of 16.8% from 2019. Alabama’s fastest growing county, Baldwin County, continues to show a significant amount of new construction activity. The 136 new homes sold in May represent a slight decrease (-1.4%) from one year ago, but the year-to-date total is up 7.8%.
In the national market, new home sales (seasonally adjusted annual rate) increased 16.6% from the downwardly revised April rate of 580,000, and increased 12.7% from one year ago. Analysts surveyed by MarketWatch anticipated new home sales to be in the 650,000 range, while actual sales were 676,000. With approximately 318,000 new construction listings nationwide in May, the market has roughly 5.6 months of supply.
KC Conway, director of research and corporate engagement at the Alabama Center for Real Estate, said that context was critical when analyzing the May 2020 new home sales report. “First, new home sales are the smallest piece of the housing sales pie. Second, the 16.7% increase is off a downward revised number. It’s still up year-over-year, but know the context as the revision exaggerates the increase.”
Conway also noted the appeal of COVID-free new inventory to prospective buyers, adding: “New home inventories are low. Entry level and under $400k product is flying as young professionals opt to buy now with low rates while still employed. Also, empty nesters with cash might decide now is the time to move where they want to retire with remote work feasibility.”
The May new construction report did raise several questions: “If it’s all so great, why aren’t builders building more homes? A lot of reasons being speculated about, but the fact is buyers of new homes know inventory is scarce and are jumping versus waiting. How deep is that pool? Maybe builders and their lenders are wondering why too and are holding back after the last housing oversupply debacle.”