Huntsville Real Estate: September 2008 8% Lower Than Last Month

Huntsville/North Alabama Area MLS: Observations Huntsville, Alabama Residential Real Estate Market September 2008:

September total dollar sales in the Huntsville, Alabama area were $138,096,195, 8% lower than last month’s $149,911,838, and 12% below last year’s level (Section A Page 4). This drop is largely seasonal but somewhat worse than might be expected. The Huntsville, Alabama area is joining the rest of the country in experiencing a slowdown in sales as exemplified by the downward curve shown by the 12 month moving average of total dollar sales. It looks like the gross sales are settling into a range between the 2006 and 2004 levels (deterioration from last month).

Huntsville Sept 08 Total Sales (click To enlarge)

Huntsville Sept 08 Total Sales (click To enlarge)

Relative to the other areas we cover, Huntsville no longer appears to be doing better, and the trends are ominous. The reality however is that the “prosperity” was largely confined to the lower priced sector, under $200,000. One would expect sales to continue between the 2006 and 2004 levels for at least the next year or so. This compares with sales which have dropped to the 2003 levels in Birmingham and the Alabama coastal areas. This is what we think a bottom look like.

We keep reporting year ago figures, which are increasingly meaningless. How are we doing now on a month to month basis? We are beginning to see “normal” sales fluctuations, as opposed to continued deterioration. We see normal as a 3% annual increase in transaction volume, after adjusting for the coming fall/winter sales slump. A 3% growth would approximate our historic growth rate. See the Caution Rough Times Ahead , on the web. I’d be surprised to see sales move outside the 2002-2004 range but, the current extreme disruption in the capital markets and the effect on consumer budgets and psyches will have a decidedly negative effect on the outlook. Unfortunately, we may be looking at further deterioration just as the local real estate market was beginning to stabilize. Note that as of October 10 the stock market averages are now in the 2003 range. We see that in the transaction levels in our real estate market but not yet in the price levels. I have posted an article on the web, Manage Real Estate Owned: Sell That House! , I will be posting an article with more crisis related material in the next few days. See (You can subscribe for free by e-mail see the links on that page top right).

Sections C and D of the main report present active and absorption data historically by Price Range and by Area.  There is a large disparity in performance and trends in different Price Ranges and Areas. For instance used houses over $900,000 had 11 new listings against 0 sales. Please look at them.

We do see continuing inventory build-up, the used market has showed a persistent increase in months of inventory now at 9.9 months, in all price ranges with the situation being quite acute for higher priced houses for new and used houses over $300,000. We see fairly rapidly rising inventory levels of over a year. (Page E-1). Over $400,000, used houses generally show over 2 years of inventory, and more than one year of new home inventory. Absolute numbers of active listing have been moderating slightly for new this month also shows a slight decline from July’s record number of active used houses, (see below). There are 7% more houses active than in September of 2007 against the lower dollar sales cited above. (Chart section A page 4).

We believe that there is an increasing amount of “shadow inventory” in both the new and used market places ie; houses held off the market for various reasons but that really are for sale. It seems to me that the For Sale by Owners (FSBO’s) are on the rise also but that many will revert to Realtor listings as they discover just how hard the market is.

The builders in the Huntsville area are facing a challenge reacting to the market conditions and constraining supply. It is unusual to see months of supply for new houses exceeding used house months of supply, although this situation is improving slightly.  The chart on page B-1 shows new listings as compared with sales for new houses only, it speaks to the seller frustration, as most of the new listings are from prior cancellations, I doubt there is that much new construction! Consumers, sellers of existing houses are having a harder time as the supply increases. The build up of existing housing supply will continue to impact the new housing market.

Total active listings decreased slightly from 8,408 in August* to 8,371 in September a decrease of 37. (See Page E-3). There were 421 new house new listings (an increase from 417 last month), while sales of new houses decreased to 142 for the month from 145 in August. New houses new listings ran 3 times the rate of sales (Section B Page 1).

Active New listings decreased from 1,957 last month to 1,932 this month, a decrease of 25 (Page E-3).

Active Used listings decreased from 6,451 last month to 6,439 this month, a decrease of 12 (Page E-3).

Total unit sales deteriorated from 854 in August to 828 in September a decrease of 26 units.

New sales deteriorated from 145 homes last month to 142 this month, a decrease of 3.

Used sales deteriorated from 709 homes last month to 686 this month, a decrease of 23 (Sect E Page 3).

Absorption for new homes was 9.9 months of inventory in September vs. 9.8 last month. see Section E page 8. Absorption for used homes was 9.3 months of inventory in September vs. 9.4 last month. This is a deterioration of 2.4 months from last year’s level at this time see Section E pg 8.

Average Days on Market for sold houses for new houses was 101 days vs. 104 days last month, with used at 104 vs. 103 last month. (See Section A Page 18).

Average sales price for sold new homes was $246,032 vs. $258,804 last month. (Chart Sect A Page 2)

Average sales price for sold used homes was $146,450 vs. $155,804 last month. (Chart Sect A Page 2)

The average prices are beginning to come down as it appears that sellers are getting more flexible on pricing.

TWB 10/12/08

*All references to last month numbers are revised, to pick up late entries (made after our prior publication date) to the MLS system.


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