Editors note: Chart accompanies release

TUSCALOOSA, Ala. – Existing single-family home sales in Alabama declined by 3.7 percent in September with 5,435 units sold, down from 5,641 units in August, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

The average sales price also dropped this month to $155,953 after posting a record high of $157,613 last month, while average time on the market remained relatively stable, shrinking from 127 days in August to 123 days in September. The total number of homes for sale increased this month by 1.2 percent to 27,042 units, setting a record for the state. This translates to a 5.0 month supply of existing homes at the current sales pace.

Year-to-date existing home sales in Alabama are up 8.6 percent from September of 2004 to 45,742 units, while the year-to-date average sales price is 14.0 percent higher than it was through the first 9 months of 2004. The year-to-date average number of days a home was on the market is 132 days so far this year, compared to 143 days as of September 2004.

“Although year to date the housing market is still ahead of last year at the time, recent trends are worrisome,” said Dr. Leonard Zumpano, director of the center. “After hitting a record high in June, home sales have declined for the last three consecutive months.”

After falling in February, prices continued to climb until last week, and it appears that supply is catching up with demand, Zumpano said. “With the exception of March, when the number of existing homes on the market fell, the supply of homes has increased steadily each month through September where it set a record,” he noted. Selling-time, however, has continued to decline, from almost five months in January to just over four months in September.

The majority of the 21 areas tracked by AREREC reported a decline in the number of homes sold in September, with only six reporting increases in sales. Prices fell in 13 of the reporting areas, increasing in the other eight locations. There appears to be some significant variation in local housing market conditions across the state.

After posting a record average sale price of $344,656 in February, Baldwin County housing prices have fallen for the last seven consecutive months. September also saw a record increase in the supply of homes in Baldwin County, up to 4,291, which at the current sale pace translates into a nine-month supply of existing housing.

“It appears we are seeing some air come out of the Baldwin County housing bubble, which should help improve housing affordability in that area,” Zumpano said. During the same month, existing home sale prices set a record in Tuscaloosa. While the number of homes for sale in Tuscaloosa has increased steadily since January, the actual supply of housing has decreased from nine months in January to 6.5 months in September because sales activity has increased there.

The average 30-year fixed mortgage rate rose slightly in September to 6.0 percent. Around the middle of October, the rate on 30-year fixed rate mortgages rose to 6.06 percent, up from a low of 5.47 percent in June. The expanding national economy and inflation fears are expected to cause long-term interest rates to continue to rise through the rest of the year, according to Zumpano. The Alabama unemployment rate rose slightly in September to 4.0 percent, according to the Alabama Department of Industrial Relations. Alabama’s unemployment rate is still well below the national unemployment rate of 5.1 percent.

The National Association of Realtors® (NAR) reported that the number of existing homes at the national level remained flat during September with 7.28 million units sold on a seasonally adjusted, annualized rate. Housing prices continue to rise due to strong demand. The national median sales price for existing homes in September was $212,000, which is a 13.4 percent increase from September of last year. The national supply of existing homes rose by 0.3 percent to 2.85 million units on the market, representing a still relatively tight 4.7-month supply at the current sales pace.

Nationally, new single-family home sales declined this month to 1.22 million units sold (seasonally adjusted, annualized), compared to 1.24 million units sold in August. The national median sales price for new homes fell to $215,700 in September.

Housing starts reached 2.1 million units (seasonally adjusted, annualized) this month for only the third time since the 1970s, representing a 3.4 percent increase from last month. Housing construction in September rose to the highest level in seven months. A 6.9 percent increase in housing construction in the South led this rise in building activity.

National employment declined slightly in September by 35,000 payroll jobs, and the national unemployment rate rose this month to 5.1 percent. The Consumer Price Index rose by 1.2 percent in September, partially due to a huge 12 percent increase in fuel prices.

“While there are obvious signs that the housing market is losing steam, this sector has continuously confounded analysts over the last half decade,” Zumpano said. “Economists have predicted that the housing market would soften each of the last five years, but the market set sales records instead. This time, however, the consensus economic forecasts may prove right. Don’t look for a crash and burn scenario. It is more likely that housing sales will slow and prices will begin to moderate as demand cools and the supply of new homes under construction come on the market.”

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 for offering a high-quality, cost-effective education.

Tara Rich, Faculty Scholar, contributed to this report

Visit us on the Web at www.arerec.cba.ua.edu