Tag Archives: ACRE

ABRE Analytics: 2013 Forecast for Alabama Residential Sales

Last year, ABRE Analytics, a collaborative research partnership consisting of the Alabama Center for Real Estate (ACRE) and Tom Brander, began studying the correlation between unemployment rates and future real estate sales projections in selected markets across the State of Alabama.
Ala - 2012 Act vs Proj 2013.jpgView full sizeABRE Analytics: 2013 residential sales projections for selected real estate markets. All rights reserved.
With the release of the metro unemployment data for January 2013, ABRE Analytics is pleased to present our 2nd annual forecast stemming from this methodology and related commentary.
Area Full year 2011 Actual Full year 2012 Proj % chg from 2011 2012 Actual Err % Diff to proj Act 2012 % Diff to 2011 Forecast 2013 2013 F’cast to 2012 Act Method Unemp or last Q
Statewide 36965 41,992 14% 39280 -6% 6% 41,799 6% Last Q
Huntsville 8610 9,050 5% 9189 2% 7% 9,835 7% Unemp
Birmingham 12468 14,550 17% 13514 -7% 8% 14,571 8% Last Q
Auburn 1132 1,138 0% 1233 8% 9% 1,338 8% Last Q
Tuscaloosa 1743 1,826 5% 1735 -5% 0% 1,935 12% Unemp
Montgomery 2774 3,679 33% 3111 -15% 12% 3,342 7% Last Q

Note: the error bars are at +/- 10%

The above table summarizes last year’s results and our expectations for 2013. These predictions assume no “major events”. As expected with any new trends model in its inaugural trial run, the 2012 predictions were mixed. Alabama residential saleswere up 5.9 percent in 2012.

In Huntsville, the forecast was within 2% of the full year 2012 results. In the aggregate, the results pointed in the right direction right, but with some error so this led the team to explore some alternative approaches for this year’s predictions to improve accuracy. In the markets with the greatest error we revised our methods to use the last quarter of 2012 sales via straight line linear regression instead of the unemployment rate. This method appears to be more accurate in most markets historically and hopefully going forward.

With these adjustments, above is the overview of what ABRE Analytics think might happen in 2013. As for the projection of a 12% increase for Tuscaloosa that is out of line with the other markets, ABRE’s opinion is that this may be a little too optimistic, but we have yet to figure out a consistent method to arrive at a better projection for Tuscaloosa in 2013. Of course, the local market’s near-term response to the tornado of April 27, 2011 certainly has a role with the difficulty in identifying a projection that could be presented with more confidence. Last year we experienced a similar issue with Montgomery, which prompted us to develop the alternative methodology of using last quarter sales for predictions.

The method ABRE used for 2012 was based entirely on the January unemployment rate for a market area. The assumption was that the January unemployment rate eliminated the effect of holiday temporary work and would reflect the mood of the populace towards buying and selling a new home in the upcoming year. A standard linear regression line yielded a better than 80% correlation since 2004 in all areas. The standard error however is somewhat high. This method also has the benefit of using two longer term trends, unemployment and home sales, and only at a single point per year, which eliminates a lot of “noise” in both series.

The seasonal regularity of sales is such that if you know the total sales for a year, dividing the total by the average proportion of the yearly sales attributable to a month has shown to be remarkably stable. Exceptions to the regularity do occur, such as fiscal cliff drama and the tax credit for first time home buyers in 2009. ABRE eliminates this data when calculating the monthly spreads.

ABRE originally chose unemployment data as it is one of the more timely pieces of data released by the government, as well as being released by geographies that generally correspond to the reported real estate market areas. Other data from various government agencies are released so late as to not be timely enough for meaningful projections.

So, what ABRE presents is our best estimate of next year’s sales which specifically excludes the possible impact of unpredictable governmental action or inaction, although even this seems to be having less impact as both the populace and markets begin to ignore political histrionics. For what it is worth, ABRE did test everyone’s favorite housing predictor, interest rates, and could not find any useful correlation.

In each case ABRE experiments with prior years data to see how well the prediction methodology would have worked. We tried using the last quarter sales of the prior year to “regress” against the full year sales of the projected (next) year. This is based on the same premise that recent data may be indicative of future results.

In each case, except Huntsville and Tuscaloosa, this methodology (last quarter of the year to the following year) resulted in greater historical accuracy in predicting and considerably better correlation numbers. We did exclude 2010 from the analysis since the last quarter of 2009 had abnormally low sales, (although the full year sales were as expected), due to the 1st time homeowners tax credit that pulled sales into earlier quarters and depressed the year end.

Complete spreadsheets with all data are available as public Google spreadsheets, which also include month by month projections, at http://goo.gl/jtJGW. ABRE presents these projections as a “work in progress” and as a tool for assessing how well current sales are performing against some level of “informed” expectation. You should not rely on them, but nonetheless ABRE hopes the projections are found useful. ABRE welcomes comments and suggestions for improvement.

About ABRE Analytics: Strategic collaboration is one of the keys to accelerating the flow of insights in the 21st century. The Alabama Center for Real Estate (ACRE) and Tom Brander has been successfully collaborating since 2009. The flow of ideas stemming from this relationship have led to solutions to better serve the Alabama real estate industry and consumers. ABRE (ACRE/Brander Real Estate) Analytics is designed to foster future creative thinking while also providing hands-on experience for student interns of ACRE.

About ACRE: ACRE’s core purpose is to advance the profession of real estate in Alabama by providing relevant resources in the areas of research, education and outreach. The Center, founded in 1996 by the Alabama Association of REALTORS, the Alabama Real Estate Commission and the Office of the Dean at UA’SCulverhouse College of Commerce, also acts as an industry liaison for the benefit of business school students pursuing a career in real estate. To learn more, please visit ourwebsite.
About Tom Brander: Tom Brander is a prominent real estate publisher. He produces The Rudulph/Brander Monthly Real Estate Report in the Birmingham, Huntsville and Baldwin County markets. His company, OSWCO, LLC (Open Software Company) is an authorized Google reseller. He has earned the Google apps sales consultant certification and the Google apps deployment certification, from Google. Tom also co-produces the ACRE quarterly Real Estate Sentiment Index and report in conjunction with ACRE. He is a designated ACRE Education Instructor and serves as a member of the ACRE Board of Trustees. To learn more, please visit http://oswco.com.

Sales Projections for Alabama Real Estate Markets 2012

ABRE Analytics studies correlation between unemployment rates and future real estate sales projections; projects statewide real estate sales growth of 13%

With the release of the metro unemployment data for January 2012, ABRE Analytics is pleased to present our combined projections and commentary for the Alabama real estate market. One note, the current projections are considerably more optimistic than the preliminary ones due to the much better than expected unemployment rates.

Area 2011 Projection 2011 Actual 2011 Error 2012 Projection Correlation% 2004-2011 % change from 2011
Statewide 37,118 36,965 -0.41% 41,992 83.68% 13.60%
Huntsville 8,259 8,610 4.23% 9,050 77.60% 5.11%
Birmingham 12,737 12,468 -2.15% 14,550 86.77% 16.70%
Auburn 1,016 1,132 10.27% 1,138 83.40% 0.49%
Tuscaloosa 1,662 1,743 4.64% 1,826 80.62% 4.78%
Montgomery 3,335 2,774 -20.24% 3,679 84.65% 32.63%

Preliminary looks at the Mobile and Baldwin county areas showed poor results, probably mostly due to exogenous events like hurricanes and oil spills. The projected increase for Montgomery seems out of line. It is also noted that the performance of the projection for 2011 in Montgomery was quite poor. Possible reasons include the high dependence on government employment and the high uncertainty surrounding it in spite of the low, and declining unemployment rate.

ABRE Analytics present these projections as a “work in progress” and as a tool for assessing how well current sales are performing against some level of “informed” expectation. You should not rely on them, but nonetheless we hope you will find them useful.

It is always possible that catastrophic financial events or natural disasters will dramatically change people’s outlook for the future and therefore immediately impact the plans for home purchases. For the time being however we do not see anything that predicts nearly as well as unemployment. Unemployment rates have issues such as people dropping out of the workforce, but overall dropping rates are one of the best indicators of consumer expectations, and therefore predictors of home buying intent.

In the process of developing this methodology we also tested it in other geographies and found similar results. Further, we tried to find correlations to mortgage interest rates and found them to be not at all predictive of home buying activity.

Month to month break-out of the yearly projections are done by taking the sum of the 2004-2011 monthly volumes, for each market, and deriving the monthly spread of sales from those volumes.

The monthly estimated volumes do show more variation since we are dealing at finer levels of detail. The monthly tables are located here http://goo.gl/WFHrO, along with all the worksheets for deriving the forecasts.. The detailed spreadsheets also show the 1st two months projections vs. actuals for 2012, which look quite accurate, except for the previously mentioned Montgomery.

About ABRE Analytics: Strategic collaboration is one of the keys to accelerating the flow of insights in the 21st century. The Alabama Center for Real Estate (ACRE) and Tom Brander has been successfully collaborating since 2009 when Mr. Brander was appointed to the ACRE Leadership Council. Council members provide insight and counsel on current market trends, and enhance the sustainability of ACRE through vision, resourcefulness, and creativity. Without creativity and collaboration, two recent ACRE projects, the “Alabama Real Estate Confidence Index” and the “Alabama Residential Data Center” gadget for smartphones would still be on the drawing board. The flow of ideas that in turn lead to solutions to better serve the Alabama real estate industry and consumers is virtually an endless stream and ACRE and Tom Brander are forming ABRE (ACRE/Brander Real Estate) Analytics as a strategic collaborative umbrella that will foster future creative thinking while also providing hands-on experience for student/interns of ACRE.

This latest initiative explores methods to project future residential real estate sales. “Late last year, Tom shared his published preliminary projections that were based on estimates of the US Bureau of Labor Statistics January unemployment rates for a limited area in Alabama. The preliminary results looked quite good and initial test showed high accuracy for 2011 (when calculated blind from the 2011 January unemployment data) and ACRE desired to broaden the project across applicable statewide markets”, according to Grayson Glaze, executive director of ACRE.

About ACRE: ACRE, housed within the UA’s Culverhouse College of Commerce, collects, maintains and analyzes the state’s real estate statistics, and is a trusted resource for Alabama real estate research, education and outreach. The relationship between the Center and our industry stakeholders is one of the Center’s greatest strengths. Alabama companies and individuals partner with the Center bringing a wealth of resources and experiences, becoming, in effect, extensions of the Center, a network through which our outreach to the Alabama real estate industry is enhanced and enriched.To learn more, please visit www.acre.cba.ua.edu.

About Tom Brander: Tom provides Real Estate market reporting services which can be found at http://tombrander.com and Software services for Web, mobile and Data analysis, using Open Source Software, more information at http://oswco.com . He is a senior member of the ACRE Advisory council, and assists ACRE in its research programs.

Alabama Real Estate Confidence Index –4th Quarter 2011


The survey projects expectations for the 4th quarter of 2011. The scale ranges from 0-100 with 0 being much worse, 100 being much better, and 50 indicating no change expected.

Sales for 2011 have been modest and the Alabama real estate community is less optimistic as the 4th quarter which is normally the slowest season for sales begins. The overall index (red below) is at 42 this year vs. 43 last year at this time and 45 last quarter, indicating less than favorable expectations for the upcoming quarter. Last year was dragged down by the oil spill on the coast and the expired home buyer’s tax credit. The outlook for sales (yellow) this quarter is modestly down at 46, down from 52 last quarter and down 2 points from last year at this time. 

4Th Quarter Survey Outlook

4Th Quarter Survey Outlook

The national score at 38 indicates particular weakness of the overall economic picture. The participants are less negative on the statewide conditions at 45. The statewide overall score declined (see green line above). For the 1st time sales, inventory, price and credit indications are all below the 50 mark. Sellers are likely to be frustrated by competition and pricing, and buyers will continue to have problems getting financing.

Regional Results:

With the exception of the Montgomery, South Central area at 42, the sales expectations for each region are within 2 points of each other from 44-46.
4th Quarter Regional Outlook

4th Quarter Regional Outlook

For two quarters in a row in the direction expressed across each of the measured questions, are showing deterioration after several quarters of improvement. To some degree this may be a seasonal phenomena, we do see a similar decline last year. In general however, the numerical scores are slightly lower this year than last.

Commercial market participants (the majority of the respondents are from the Birmingham market area) moved to projecting a declining market this quarter at 47 this quarter vs. 53 last for sales expectations. Price expectations remain weak, at 41 vs 43 last quarter indicating continued pricing pressure in all markets. The score for credit availability remains poor, at 41 down 5 points from last quarter, a level which indicates expected contraction in credit availability.

North Region

North Alabama experienced a consistent downtrend in all scores.  The total score of 42, down from 45, a 3 point drop from last quarter.  Weakness was particularly noticeable in the Rural markets, where the overall score declined to 39 from 46 last quarter

North Central Region

The North Central Region overall score dropped to 43 from 47 last quarter, The sales score declined 7 points to 47. Inventory, pricing, and credit are all below the 50 mark at 43, 40 and 40 respectively.

South Central Region

The South Central Region participants outlook for sales declined 7 points to 42.  Rural participants sales expectations dropped 13 points to 35.

South Region 

The Southern Region sales score declined 10 points to 47. Rural participants sales expectations dropped 22 points to 39.

About the Alabama Real Estate Confidence Index and Survey:

Over 600 professionals responded to the 4th quarter 2011 survey which was conducted during the month of September 2011. The survey, conducted by the Alabama Center For Real Estate now has the largest participation of any real estate survey. It provides important market insights. Full history and scores for each market segment are located here on the web http://goo.gl/H22gR

The ACRE Leadership Council  determined the need for a statewide industry confidence index and this was adopted as the Council’s first initiative. Tom Brander, Council Member, was selected by the Council and Grayson Glaze, ACRE Executive Director, to spearhead and work with the Center to conduct and produce its Alabama Real Estate Confidence Index (ARECI). The Council appreciates everyone who participated. 

For further information contact Tom Brander at Tombrander@tombrander.com or Grayson Glaze at gglaze@cba.ua.edu  

Birmingham home sales fall in October as economic fears rise – al.com

The Birmingham News reported on the MLS press release today as follows.

Average Alabama sales price drops to $146,169

Tuesday, November 25, 2008

RUSSELL HUBBARD News staff writer

Birmingham-area home sales fell 30 percent in October compared to the same month in 2007, a drop that real estate experts said reflects turmoil on Wall Street and concerns about a faltering economy.

via Birmingham home sales fall in October as economic fears rise – al.com

The Birmingham News noted our article as follows:

The drop recorded by the Birmingham Association of Realtors was better than the 36 percent decrease forecast last week in the Rudulph/Brander Real Estate report, which is based on preliminary statistics. Tom Brander, the author of that report, also said October home sales were dragged down by swooning stocks and falling consumer confidence.

I’d like to note that we also reported exactly the same drop in unit sales, 30%. We also reported the 36% drop in dollar sales, which the MLS release makes no reference to. We also noted the reduction in inventory. Our full release for October is here. The reduction in average sales price MLS reports accounts for, and agrees with the drop in total dollar sales. Each group, MLS, ACRE, And Rudulph/Brander, works with the same data and produces consist ant statistics, which may differ in actual counts such as sales and inventory but the trends are consist ant with each group.