TUSCALOOSA, Ala. — With inflation and interest rates on the rise, Alabama real estate professionals in both the commercial and residential fields didn’t have a positive outlook on the market for the upcoming quarter, according to new reports by the Alabama Center for Real Estate (ACRE).
Why it matters: In the inaugural confidence index, respondents forecast that the commercial and residential real estate markets will weaken in the third quarter, citing an increase in interest rates, construction costs and cap rates as the main culprits for decreased growth.
By the numbers: The Alabama Commercial Real Estate Index™ (AL CREI™) and the Alabama Residential Real Estate Index (AL RREI™) had index scores under the neutral mark of 50, registering a negative outlook for the third quarter with a 42.2 and a 48.9, respectively.
- The AL CREI™ also registered a separate index for owners, brokers and developers (OBDI™) which was slightly higher, but still registered a slightly negative score of 46.9.
- Commercial real estate professionals had a strong negative forecast for the United States market outlook with an index score of 38.3. As for the statewide outlook, respondents remained pessimistic with an index score of 47.2.
- The residential industry leaders aligned with their counterparts in the commercial landscape regarding the nationwide forecast, tallying an index score of 44.9. The mark indicates professionals are moderately confident the U.S. market would get worse.
- However, industry professionals differed when it came to the Alabama outlook as residential respondents were mildly confident the market would improve with a 52.9 index score.
What they’re saying: Report author Stuart Norton suggests that the index scores can rise above 50 for both fields, but will need “the FED eventually loosen monetary policy” so interest rates can decrease.
The AL CREI™ and AL RREI™ will be offered once a quarter with the goal of being a forward-looking tool for the industry. To become a participant for the fourth quarter, register for the commercial index or the resident index on the ACRE website.
Susannah Robichaux from the Alabama Center for Business and Economic Development assisted in the report through data collection and processing. Senior Graphic Designer at the Culverhouse College of Business, Katie Howard, is credited with the graphic designs in the report.
