TUSCALOOSA, Ala. – The Alabama housing market was sending mixed signals at the beginning of the new year, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

The total number of existing homes sold during the first month of 2005 fell by 832 units to 3,348, a 20 percent decline from December. Even with such a large fall in sales, the total number of homes sold in January 2005 still outpaced January sales in 2004, a record year for home sales.

There were more homes sold this January than in any other January since the Real Estate Center has been tracking Alabama’s housing data. In fact, the only other time January home sales broke the 3,000 mark was last year.

“In addition to the drop in sales, some of our other housing statistics also seem to support the possibility of a softening market,” said Dr. Leonard Zumpano, director of UA’s Alabama Real Estate Research and Education Center. “Selling time increased from 135 days in December to 146 days in January. It now takes an average of almost five months to sell a home in Alabama.

“At the same time the supply of homes for sale increased from December of last year. At last month’s sales pace we had a seven month supply of homes compared to a 5.6 month supply in December.”

Despite the sales decline and increased supply, home prices continue to increase. Existing home prices were up 6 percent from December, with the statewide average reaching $145,742 in January. What seems to be a contradiction of the law of supply and demand may reflect “step up” buyers, Zumpano said.

“Even though sales were down, the high end of the market appears to remain strong, with consumers apparently buying larger and more expensive homes,” he said.

Within Alabama, existing home sales increased in only two of the 19 areas tracked by the research center, up slightly in both Jackson County and Selma. The average selling price rose in 11 of these locations and fell in the 10 remaining sites.

Several of the areas reported record highs for home selling price during January. By far the most astounding record was the average selling price of $294,236 posted by Phenix City. Calhoun County and Tuscaloosa also reported record high selling prices of $121,778 and $161,184, respectively.

In the Southern region, existing home sales increased 3.5 percent or 90,000 units in 2,640,000 in January (on an annualized, seasonally-adjusted basis). Existing home sales are 13.8 percent higher than they were at the same time last year. Interestingly, the South’s average selling price fell 1.4 percent during January from $223,000 to $220,000. This selling price is 12.2 percent higher than it was in January 2004.

On the national level, the number of existing homes sold decreased slightly by 0.1 percent in January, down from 6,810,000 in December to 6,800,000 in January. The nation’s average selling price fell 1.2 percent to $241,000. Last month’s selling price, however, is 10.6 percent higher than in January 2004.

“As far as the new home market is concerned, we have more mixed signals,” Zumpano said. “The Commerce Department reported that new home sales fell by 9.2 percent in January while the median price of a new home fell by 13.2 percent, to $199,400, the lowest level in more than a year. Many analysts attribute last month’s poor showing to the bad weather that hit many parts of the country, rather than a problem in the new home market.

“There is support for this hypothesis. According to the National Association of Home Builders, there were 2,159,000 new housing starts during January 2005. This is the highest number of housing starts ever recorded on the NAHB website, a sign of a strong start for the new home market in the near term in 2005.”

Zumpano said one month’s data is not enough to base predictions on and noted that the January numbers are “not particularly revealing. Despite economists’ predictions of a slowing housing market for 2005, most current economic data points to an expanding economy, moderate inflation, and slowly rising, but still low mortgage interest rates.

“While the market may, in fact, take a breather after almost 10 years of interrupted expansion, nothing in the data suggests any serious problems ahead for the housing market over the next six to 12 months.

“The only real causes of concern are the continuing federal budget deficit problems and the falling value of the dollar which could drive up mortgage interest rates and dampen housing demand, especially in those markets where speculative activity has resulted in double digit increases in housing prices over the past few years.

“How we deal with Social Security and Medicare could have a pronounced impact on the U.S. housing market over the next few years.”

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.

Alan J. Lloyd, research assistant, contributed to this report.