May Birmingham Area Sales Drop After Tax Incentives Expire

Birmingham Area MLS* Monthly Observations for May 2010

I use total dollar sales as an overall indicator for the market; it comes from my banking background, rather than unit sales. I was surprised and disappointed to see that for the 1st time in ten years the total Dollar volume from April to May declined. Sales in May declined to $ 208,975,305 down 4% from April at $217,198,109. This is a decline of .5% from last May ($209,960,262). This reflected the impact of the termination of the tax credit at the end of April, although I would have expected more closing activity to be reported in May. Again the expectation for sales next month is to trend up (see the chart Sec A p.4), but with the expiration of the tax credit, and the transition to more normal, non-incentivized sales the prospects rest both on the seasonal factors as well as hopefully, the improving economy. The twelve month moving average line of total dollar sales chart remains fairly “flat”.

Total unit sales declined by 4% to 1,308 in May from 1,364 in April, a decrease of 56. This is a 9% improvement from May 2009 (1,203). New sales improved 2% to 202 homes this month from 198 in April, an increase of 4 units. Used sales deteriorated 5% to 1,106 homes in May from 1,266 last month, a decrease of 160 (Sect E p.3).

A somewhat larger than normal inventory increase in both New and Used homes is underway. For this month total inventory is down 2% from last year at this time at 13,327 vs. 13,587. Active New listings decreased to 1,297 in May from 1,642 in April, a decline of 345 units (Sect E p.3). In April it appears that builders decreased permits. The number of housing permits has decreased somewhat to 83 in April vs. 91 in the prior month for Jefferson County. Shelby County also declined modestly (See the web site for details). New inventory is now below the 1,800 level which reflects more normal pre-2004 levels, approaching a more normal level, now 6.9 months supply at the reduced sales pace. In light of the heavy Used inventory, and low sales levels, I would not be in a rush to build! (Sect C p.1, (compare it to last month) and Sect E p.3).  It is somewhat distressing that a number of more affluent areas are getting a lot of new listings. Homewood, Area 230, is the most dramatic example, with used inventory now 395, very close to last month’s all-time high of 402 Used homes, a 14 month supply.

For Used homes the months of inventory has begun to creep up, which is a concern. Absorption rate for New homes improved to 6.9 months of inventory, which is better than the 9.4 months last year at this time (Sect E p.3). New house inventories in the higher price ranges (above $500,000) remain excessive at over a year. That situation is getting worse as new listings come on, and sales are sluggish.

May 2010 shows 12,030 Used Active listings (Sect E p.3). Absorption for Used homes is at 12.6 months of supply. This is slightly worse than the 12.4 months of supply last year at this time (Sect E p.3). The higher price ranges are doing poorly and deteriorating as new listings are adding to the oversupply. The market for houses requiring “Jumbo” loans remains stagnant.

Birmingham area Average Days on Market for New houses was 206 compared to last month at 232. The Used house DOM was 138 in May compared with 139 last month (Sect A p.18). (Note: we no longer attempt to subtract pending days from active as it was causing some very wild distortions)

Average sales price for Sold New homes decreased to $198,459 from $201,264 last month (Sect A p2). Average sales prices for Sold Used homes increased to $152,700 from $152,099 last month (Sect A p2). The twelve month moving average price line for New homes is heading down, reflecting that most sales activity continues to be on the lower end of the market. But the average price for Used has begun to move up, slightly reflecting a bit of activity in the upper price ranges. (Sect A p2). It’s hard to read too much into average prices with the shifting mix.

TWB 6/13/10


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