Modest Sales Increases Huntsville Real Estate December 2008


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

After a string of awful monthly sales declines the Huntsville /North Alabama area had a very modest increase in sales for December. This is good news as the real estate market seems to be reacting to the perception (and reality) of mortgage availability and declining rates. Given the continuing focus by the administration and monetary authorities on these issues, the outlook is somewhat brighter.

December total dollar sales in the Huntsville, Alabama area were $81,117,618, 2%, higher than last month’s $79,731,099, and 40% below last year’s level ($134,782,311) (Section A Page 4). It looks like the gross sales which dipped to the 2002 levels last month, are now back between 2004 and 2006 levels (an improvement from last month).

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; only 13 houses total, New and Used Sold over $400,000 out of 807 listings. Please see sections C and D. Virtually all sales activity is in homes that fall into the “conforming loan limits under $417,000. For the time being homes requiring Jumbo loans are not selling. At this time there does not seem to be any political enthusiasm to address this issue with all attention being placed on the conforming market. Of course fixing that will eventually help the upper end as well, finally allowing trade-up consumers to sell the lower priced property.

We do see continuing inventory build-up. The Used market has shown a persistent increase in months of inventory and now is at 9.1 months in all price ranges. The situation is 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 $300,000 are over a year and in some price ranges over three years of inventory. (Page E-1). Absolute numbers of Active listings have been moderating slightly for a few months, (see below). There still remains 1,868 New homes for sale, about double what would have been normal prior to 2006 See chart Page C-1. There are 1.3% fewer houses Active this month (7,734) than in December of 2007, (7,636) 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.

The builders in the Huntsville area are facing the challenge of reacting to market conditions and constraining supply. In Huntsville city we see at least a year’s worth of inventory of New homes and yet, we continue to see fairly high numbers of building permits issued. In November, for instance there were 48 single family permits issued in Huntsville city alone, compared with 90 for the same period last year. We provide a link to this free census department data on our Blog site under data sources in the right column. It is unusual to see months of supply for New houses exceeding Used house months of supply. The chart on page B-1 shows New listings as compared with sales for New houses only. 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 from 8,602 in November* to 7,734 in December, a reduction of 868. (See Page E-3). There were 262 New house New listings (a decrease from 304 last month), while sales of New houses increased to 105 for the month from 104 in November. A substantial reason for the inventory reduction was “Failures” (952 for the month) most of which will probably come back to the market. New houses New listings ran 2.5 times the rate of sales (Section B Page 1).

Active New listings decreased from 2,132 last month to 1,868 this month, a decrease of 264 (Page E-3).

Active Used listings decreased from 6,470 last month to 5,866 this month, a decrease of 604 (Page E-3).

Total unit sales improved from 470 in November to 528 in December an increase of 58 units.

New sales improved from 104 homes last month to 105 this month an increase of 1.

Used sales improved from 366 homes last month to 423 this month, an increase of 57 (Sect E Page 3).

Absorption for New homes was 11.0 months of inventory in December vs. 11.9 last month. This is a deterioration of 1.3 months from last year at this time. See Section E page 8. Absorption for Used homes was 9.1 months of inventory in December vs. 9.8 last month. This is a deterioration of 3.2 months from last year’s level at this time see Section E pg 8.

Average Days on Market for Sold New houses was  102 days vs. 92 days last month, with Used at 102 vs. 104 last month. (See Section A Page 18).

Average sales price for Sold New homes was $229,733 vs. $249,373 last month. (Chart Sect A Page 2)

Average sales price for Sold Used homes was $128,322 vs. $140,833 last month. (Chart Sect A Page 2)

For the record average Used prices were $136,670 last year at this time which indicates a 6% reduction. Much is due to no higher priced houses selling however, so it’s hard to read too much into either this figure or even a median figure, since the mix is swinging quite a bit.

The average prices are beginning to come down as it appears that sellers are becoming more flexible on pricing. Given market conditions I expect to see more downward price adjustment.

TWB 1/10/08

*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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4 thoughts on “Modest Sales Increases Huntsville Real Estate December 2008

  1. Zack Bryce

    Does there seem to be any negative home sales effects on the Northern Alabama area (primarily Huntsville and adjacent communities) to the likely massive cutbacks in Military (new or current technology development) and NASA spending by Obama and his decidedly left leaning cabinet? Obama made no attempt to hide his remarks on spending cutbacks in these two areas during the campaign. It seems to me that this would be devastating to that area, where Birmingham and other semi-industrial areas of the state would be much lesser affected.

    I had one prominent Realtor in HSV tell me if and when this happens, HSV will become a ghost town since it is so geared to this area of technology. There’s no Honda, Nissan, etc. car manufacturing, or anything similar in that area.

    Reply
  2. Brad

    Zack – much of the military spending in Huntsville as a result of 2005 BRAC will still come to pass regardless of any cuts by the Obama administration. Instead of experiencing explosive growth as was expected, Huntsville will be ordinary.

    In addition, Huntsville does have some manufacturing base – a Toyota plant making engines for the new Tundra among them.

    Reply
  3. Philip Winburn Huntsville Realtor

    Brad,

    I concur with your assessment of Huntsville’s local economy. We had a recent dinner party with a gentleman who oversees the several construction projects on Redstone Arsenal related to the Base Realignment and Closure (BRAC). He indicated that regardless of administration, that BRAC is on schedule and will proceed. There are several commands moving to Huntsville with primary positions estimates from 2,500 to 3,200.

    The BRAC is partially due to post 9 /11 security concerns. Facilities in the D.C. area are less defensible than campuses located on a secured military facility. In addition to the Department of Defense positions, there will be many related and unrelated positions as Huntsville’s population grows.

    While Huntsville’s economy does have a strong defense sector the fear of the realtor quoted by Mr. Brice is overstated.

    While courting Toyota to build in Huntsville was a major achievement, Toyota is not a major employer and the positions for most workers are not lucrative.

    Huntsville has an aggressively growing biogenetics industry. We have sold homes to two clients moving to the area to work in the new Hudson-Alpha Institute’s building in Research Park. This building is the first of ten planed by the institute.

    The slowing of sales is not a result of a slow local economy. Our local and state Chambers of Commerce are predicting shortages of workers in Huntsville over the next several years. Two Department of Defense surveys have shown that only 25% to 30% of the personnel associated with the BRAC command moves will relocate to Huntsville. The new positions must be filled from other pools. The DOD is already recruiting in southern universities.

    The over correction in lax loan underwriting has affected Huntsville’s real estate market to a degree. Clients who could have easily qualified for home loans 14 months ago no longer can. There are signs of local and regional lenders loosening their standards over the past several weeks. National banks and lenders still haven’t loosened their requirements much, especially in the case of investors.

    Starting in 2007 our market had a bubble caused by out of area realtors and investment groups whose local market and livelihoods had dried up due to soft markets in their areas. We had several investment groups and out of state realtors who formed confederations with less that honest local realtors to sell to out of area investors.

    The investors were shown questionable sales, appreciation and rent roll data for properties that were in areas where we would never allow our investor clients to purchase. The homes were in areas much too far from the city, in areas without shopping and with long commutes to the city. Some of the properties were on very busy roads or had other fatal location flaws. Many investors never saw the properties and from a lack of personal due diligence, have experienced financial catastrophe.

    Many of these investors came to our firm for management of their properties after their purchase. Many became quite angry with us when we provided accurate information on rental amounts, flat sales and depreciation of the properties they had purchased. I saw these same investors move from property manager to property manager seeking those that said what they wanted to hear. Meanwhile the properties remained vacant or worse, the property managers installed unqualified tenants who did not pay rent and abused the properties.

    We have been able to keep a number of these investors afloat by marketing their properties and finding qualified tenants but their properties have still not appreciated to the point that they could sell without a substantial loss.

    Protocol prevents me from naming the local realtors that were involved but they all have extremely poor reputations in the local realtor community. I have brought two of them to the local board of realtors for their actions but local and state enforcement is quite lax.

    I had seen cases of unscrupulous lenders falsifying loan documents to beat their competitors’ rates. Two years ago I sold an upscale home to a young couple that had moved to the area. At closing the wife was signing the last document (resigning the loan application). The seller had left with their money and the listing agent with hers. The wife got a funny look on her face and said, “ This isn’t right”. Someone at the lender had falsified the loan application, stating the wife had income that didn’t exist.

    We called the lender who responded by pulling the funding and not returning our calls. I reported the fraud to the state, but no action was ever taken. I follow the career of the loan originator who falsified the application and let his new employer know of his actions each time he moves. Multiply this dishonesty by hundreds and thousands and the result is the current national financial crisis seeded in the housing crisis.

    For the past three years builders in Huntsville have been putting up homes without regard for supply and demand or site selection. Even the large production builders who have the resources to research and understand the market were slow respond. There are upscale neighborhoods in areas that are too far from the city and in areas with mobile homes, inadequate roads and poor schools.

    I have shaken my head in disbelief over some of the subdivisions. Builders, investors and lenders who did not use even the most basic logic caused the local bubble and subsequent slowdown. The flame was fanned by a handful of greedy (often promanite) realtors whose only ethic is that of doing whatever it takes to get the next commission check.

    On the positive side, our firm’s sales were off only 12% last year and our personal sales remained constant. Activity in the past several weeks had been at pre-crash levels. Most builders have finally reacted. We expect the local market to correct this summer.

    The realtors associated with the investor debacle are still in business however. Let the buyer beware.

    Philip Winburn

    Reply
  4. tbrander Post author

    I appreciate your thoughts!!
    This month I’m highlighting that even with BRAC there are 7500 homes listed currently and a surprising number of Building permits.. Huntsville still will have a way to go to correct. If you are over $200,000 the market is still very bad, The lower price range is so much larger it really distorts the stats making things look better than they are.

    Reply

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