According to the February 2023 Alabama Economic and Real Estate Report released by Alabama REALTORS®, 6,974 homes were sold across the state in February, a 22.3 percent decline from February 2022. This marks the slowest February market the state has seen in five years.
Continued increases in the fed funds rate has put upward pressure on mortgage rates. Average 30-year fixed mortgage rates climbed throughout February to 6.73 percent by the second week of March, placing pressure on average sales price to decline.
“All eyes will be on the Federal Reserve this week to see whether it will continue to raise the federal funds rate despite recent cracks in the banking sector and high-profile bank closures,” said Jeremy Walker, CEO of the Alabama Association of REALTORS. “The Federal Reserve seems determined to drive the economy into a recession in its fight against inflation.”
As the real estate market responds to economic uncertainty and the volatile interest rate environment, Alabama’s overall dynamics have increased the competitive balance between buyers and sellers. “We’re seeing an increase in inventory and new listings which is giving buyers more options during the search process,” says Alabama REALTORS® 2023 President RaJane Johnson. “Despite the increase in inventory and new listings, property values remain strong for sellers with most listings continuing to see competitive offers.” These trends are expected to continue in the coming months.
Here are several key takeaways from the report:
February 2023 Alabama Economic and Real Estate Report
• Alabama had 6,974 home sales in February. This is a decrease of 1,998 sales compared to February of last year.
• The median sales price decreased by $12,017 compared to a year ago, to $206,253. This is a decrease of 5.5 percent.
• The sold volume was $1.6 billion in February, a decrease of $0.9 billion from last February. This is a 33.3 percent decrease.
• The 11,104 active listings at the end of February marks an increase of 68.7 percent compared to the 6,584 of one year ago.
• The 389 foreclosures recorded in February mark the third consecutive month of decline, despite representing a 34.1 percent increase over the previous year.
• The slowdown in the Alabama housing market is likely to continue next month. Historically, sales
in March are often lower as sales activity begins to pick up again in April. AAR Projects the following forecast from February to March in 2023:
– State total home sales will further decline from February 2023 to March 2023 by approximately 5.0 percent to 6,625.
– State median home sale prices will further decrease between February 2023 to March 2023 by approximately 2.0 percent to $202,196.
– State average home sale prices will decline by 0.2 percent between February 2023 to March 2023 to approximately $236,102.
– State residential sales volume will decrease between February 2023 to March 2023 to approximately $1.56 billion.
– State residential days on market will decrease between February 2023 to March 2023 by approximately 22.4 percent to 52 days.
– State residential supply will increase between February 2023 to March 2023 to 2.4 months of supply.
– State residential active listings will decrease between February 2023 and March 2023 by 4.4 percent to 10,617.
– State residential foreclosures will further decrease between February 2023 to March 2023 by 4.4 percent to 372.
• Average 30-year fixed mortgage rates climbed throughout February from 6.09 percent, to start the month, to 6.73 percent by the second week of March. This rate has fallen to 6.60 percent as of March 16, 2023. Still, potential buyers may not be able to afford higher mortgage payments associated with rates above 6.5 percent, which could cause sale prices to decline.
• As inflation remains above the Federal Reserve target of 2.0 percent and national job growth remains strong, markets are expecting another 0.25 percent increase in the fed funds rate target at the Federal Reserve’s meeting in March. Increases in the fed funds rate put upward pressure on mortgage rates.
• While job growth remains strong, there are indications of potential weaknesses in the national economy. The Conference Board Leading Economic Index decreased again in February, continuing to signal a potential recession in 2023. Additionally, the ISM Manufacturing Purchasing Managers Index revealed a third consecutive month of contraction in the manufacturing sector.
• The job market remains strong in Alabama, with 3 consecutive months of job growth recently. The statewide job base has increased by 40,800 jobs over the last 12 months to over 2.1 million jobs total. The unemployment rate has remained at 2.6 percent since June 2022. Additionally, the civilian labor force has increased over the last 4 months.
The Alabama Economic and Real Estate Report is published monthly and annually by the Alabama Association of REALTORS®. Click here to view the full monthly and annual reports.