Observations Huntsville, Alabama Residential Real Estate Market October 2008:
The poor performance of world stock markets has negatively impacted the local real estate market and consumer confidence is at an all time low.
October total dollar sales in the Huntsville, Alabama area were $112,694,776, 21%, lower than last month’s $142,018,857, and 31% below last year’s level (Section A Page 4). This drop is unusual since over the last 10 years excluding this one, the average change between September and October has been “none”. 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 looked like the gross sales are settling into a range that was between 2004 and 2006, is now looking like it may sink below the 2004 levels (deterioration from last month).
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 have hoped that sales would continue to fall between the 2004 and 2006 levels for at least the next year or so. But the extreme nature of the national economic picture is being felt here also. This compares with sales which have dropped to the 2002 levels in Birmingham and the Alabama coastal areas. While we were talking in terms of a bottom for the last few months the current economic backdrop makes further decline highly likely.
See the Caution Rough Times Ahead , on the web. I would no longer be surprised to see sales move lower than the 2002-2004 range, as I wrote last month:
“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. “
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 7 new listings against 0 sales. Please see sections C and D.
We do see continuing inventory build–up. The used market has shown a persistent increase in months of inventory and now is at 9.4 months in all price ranges with the situation being quite acute for a broadening price range of houses, Used homes over $200,000 now are over 12 months of inventory and in some price ranges as much as 4 years of inventory. New houses over $400,000 are over a year and in some price ranges approaching three years of inventory. (Page E-1). Absolute numbers of active listings have been moderating slightly for a few months, (see below). There are 6% more houses active this month than in October 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 i.e.; houses held off the market for various reasons, but that really are for sale. It seems to me that the For Sale by tough the market is.
The builders in the Huntsville area are facing the challenge of reacting to 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, and speaks to the seller frustration. As most of the new listings are from prior cancellations, I doubt there is that much new construction! 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 8,511 in September* to 8,276 in October a decrease of 235. (See Page E-3). There were 441 new house new listings (an increase from 425 last month), while sales of new houses decreased to 133 for the month from 149 in September. New houses new listings ran 3.3 times the rate of sales (Section B Page 1).
Active New listings decreased from 1,980 last month to 1,925 this month, a decrease of 55 (Page E-3).
Active Used listings decreased from 6,531 last month to 6,351 this month, a decrease of 180 (Page E-3).
Total unit sales deteriorated from 849 in September to 688 in October a decrease of 161 units.
New sales deteriorated from 149 homes last month to 133 this month, a decrease of 16.
Used sales deteriorated from 700 homes last month to 555 this month, a decrease of 145 (Sect E Page 3).
Absorption for new homes was 10.2 months of inventory in October vs. 10.1 last month. see Section E page 8.
Absorption for used homes was 9.4 months of inventory in October vs. 9.4 last month. This is a deterioration of 2.5 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 113 days vs. 101 days last month, with used at 105 vs. 104 last month. (See Section A Page 18).
Average sales price for sold new homes was $231,465 vs. $248,922 last month. (Chart Sect A Page 2)
Average sales price for sold used homes was $140,367 vs. $145,890 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.
*All references to last month numbers are revised, to pick up late entries (made after our prior publication date) to the MLS system.