TUSCALOOSA, Ala. - The Alabama housing sector continued to push forward in April, setting yet another record for number of homes sold in one month. A total of 4,108 existing homes were sold in the 20 areas tracked by The Alabama Real Estate Research and Education Center at The University of Alabama.

The total solidly beat August 2002’s record of 3,901 units. In fact, every indicator pointed towards strength in the state housing market in April.

The average price of existing housing in Alabama rose by a strong 6.5 percent in April, up to $127,417, but on a year-to-date basis, existing home prices are up 3.0 percent, which translates into more than a 6 percent annual rate of appreciation, according to AREREC.

The rise in home prices continues to outpace the annual statewide increase in median income of 0.11 percent, as reported by the U.S. Department of Housing and Urban Development, but is mild when compared to the recent nationwide increase of around 8.0 percent, according to Dr. Leonard Zumpano, director of the center. Zumpano said a drop in the supply of homes to 6.44 months, from 7.63 the previous month, suggests a tightening housing market, which could put additional upward pressure on home prices in the months to come. Average days on the market fell to 148 days from 161 days, another signal of a strong market.

“In general, the housing sector was hot in April with more homes sold at higher prices and in shorter time spans,” Zumpano said. “As has been the case for quite a while now, a relatively steady employment situation and record low interest rates have been the main catalysts for the housing market. With little fear of inflation and a volatile stock market, investors continue to move into the bond market, pushing long-term interest rates to new record lows. Although the March unemployment rate, which is the latest available at this time, increased to 5.7 percent from 5.5 percent in Alabama, the employment situation continued to improve on a non-seasonally adjusted basis, which will bring down the unemployment rate if this trend continues.”

Home sales increased in 12 of the 20 locations traced by the Center, declined in 6, and remained unchanged in two areas. The areas posting the largest percentage gains in the number of homes sold on a month-to-month basis are Baldwin County and Huntsville.

Baldwin County reported a 64.3 percent gain to 455 units sold, while Huntsville reported a 28.3 percent gain to 648 units sold during the month. On a year-to-date basis, Baldwin County, Huntsville, Muscle Shoals, Tuscaloosa, and Walker County all have posted growth rates in excess of 20 percent in the number of homes sold.

Residential construction spending also continues to be positive across the state, posting a 15.0 percent increase year-to-date from April 2002, according to F.W. Dodge Reports. Only three of the 11 areas monitored by AREREC posted a decline in spending: Anniston, Florence, and Huntsville. Growing residential construction spending could lead to further growth in the housing sector in the near term.

Existing home sales continue at a strong pace at the national level as well. Sales of existing, single-family homes increased 5.6 percent to 5.84 million units in April, according to the National Association of REALTORS®. The supply of homes crept up to 5.1 months from 4.9. The median sales price rose less than one percent to $163,400.

While home prices are still up 6.8 percent versus this time last year, the increase in supply at the national level has helped slow the rate of appreciation in the last couple months. With all of the market fundamentals still in place, the NAR is predicting another record setting year for home sales in 2003.

The Wall Street Journal recently reported that home prices increased 38 percent during the last five years. The increase in home equities has helped sustain consumer spending, and has helped offset the fall in net wealth created by the collapse of the stock market, Zumpano said.

Housing starts fell 6.6 percent in April to 1.63 million units. Through the first four months of 2003, total housing starts remains near record levels, however. Much of the April drop can be attributed to a 23 percent decline in multi-family units.

The employment situation worsened for the third consecutive month. A preliminary figure of 48,000 non-farm, payroll jobs were lost in April, pushing overall unemployment to 6.0 percent. Many economists believe strong economic growth on the order of a 3.0 percent in GDP is needed before the job market fully recovers. That said, the NAR is forecasting a net increase of one million jobs by the end of the year.

Mortgage rates hit new record lows in April and have continued to fall in May, hitting a new low of 5.17 for a 30-year, fixed rate loan for the week ending May 16, according to the Mortgage Bankers Association of America.

The Consumer Price Index actually fell 0.3 percent in April, mostly due to falling energy costs. As long as inflation is kept at bay and economic uncertainty keeps investors in the bond market, interest rates should stay near record lows, Zumpano said.

The low interest rates have helped a record number of people become homeowners in the last two years. According to the U.S. Census Bureau, 68.0 percent of American households were homeowners in the first quarter of 2003. The record high of 68.3 percent was set in the forth quarter of 2002.

Zumpano said all of the fundamentals, at least so far, remain in place to keep the housing sector in record setting territory for 2003. Should the economy recover, however, the growing federal budget deficit could precipitate a run up in long term interest rates, which, in turn, could put significant downward pressure on the housing sector.

The Alabama Real Estate Research and Education Center is part of The University of Alabama’s Culverhouse College of Commerce and Business Administration. The UA business school, founded in 1919, has been recognized repeatedly during the 1990s for offering a high-quality, cost-effective education.