New listings decline further while home sales prices remain stable
Even as residential markets are in “peak season,” historically speaking, new listings are becoming even more scarce as some potential sellers decide to wait out the pandemic. A recent report from Redfin cited 48,965 new listings the week of April 20th, down roughly 50% year-over-year and significantly lower than the 33% decline seen at the beginning of the month. New listing data is also significant as a forward-looking indicator, and offering a glimpse of future market conditions. With inventory tightening nationwide, home sales prices are likely to remain stable amid the declining economic activity caused by the pandemic.
The same is also true for Alabama. Inventory shortages (homes listed for sale) have become the new normal as statewide residential listings have declined (year-over-year) for 61 consecutive months, with the last gain in March 2015. As a result, median sales prices are continuing to rise in metro areas across the state. Twelve of the state’s 14 metro markets posted gains in median sales price from one year ago, while all 14 are up year-to-date. Building on the momentum from a strong finish to 2019, price appreciation has been especially strong in the first quarter of the year.
Large metro areas (Birmingham, Huntsville, Montgomery, Mobile) average 9.3% growth in median sales price year-to-date, while midsize metros (Anniston-Oxford-Jacksonville, Athens, Auburn-Opelika, Daphne-Fairhope-Foley, Decatur, Dothan, Florence-Muscle Shoals, Gadsden, Phenix City, Tuscaloosa) averaged 6.1%. Sales activity is expected to decline in the Spring and Summer months due to slowing overall economic activity, but sales prices should remain stable (even growing slightly), but not at the rates seen during Q1 2020.
Mortgage rates reached historic lows in late April, providing some relief from price appreciation to current buyers. However, obtaining a loan has become increasingly difficult as lenders adjust to rapidly changing economic times. Uncertainty surrounding forbearance programs and quickly changing buyer profiles has some lenders taking extra measures before issuing new loans. A recent report cited that almost 7% of mortgages nationwide were in some forbearance last week. Delinquency rates have continued to climb, leading originators to tighten standards for some borrowers and loan types. Even with rates in the low to mid 3% range, borrowers with low credit scores or those wanting an atypical loan (FHA or jumbo) might have to pay a significantly higher rate.
The Center will continue to examine the impact of COVID-19 to Alabama’s residential markets, with April home sales data and analysis available May 21.