Editors Note: Chart accompanies article.

TUSCALOOSA, Ala. - In a year when economic growth was either slow or negative, the housing markets in Alabama and the United States set records for the number of existing homes sold, according to the Alabama Real Estate Research and Education Center at The University of Alabama.

"This is rather remarkable in an economic environment that teetered on the brink of recession for most of the year," said Dr. Leonard Zumpano, director of the center and professor of finance. "It seems that the Federal Reserve's aggressive interest rate policy, by helping to support the housing sector, also buoyed the entire economy."

According to Zumpano, the number of homes sold last year in Alabama increased by 3.3 percent, from 33,424 in 2000 to 34,531 in 2001. "The increase in Alabama home sales is actually higher than reported here," Zumpano said. "A number of local associations, including Montgomery, did not report home sales data for the month of December. Montgomery alone accounts for approximately 10 percent of total statewide monthly home sales."

According to the center, record annual sales were recorded in the state despite a fall in sales during December, typically a slow month for the housing sector. For the last month of the year, the Alabama housing market slowed somewhat, with total homes sales declining 6.5 percent from November.

The number of existing homes for sale in Alabama fell by 12 percent in December to 23,450, down from 26,649, causing the supply of homes to drop to 9.7 months, down from 10.3 months supply in November, according to the figures released by the center.

Statewide, the median home price for existing homes slipped 1.8 percent to $108,480 from $110,495 in November. During the same period, the average days on the market increased by 9 days from November to 158 days, or approximately 5 months. "Both statistical series are consistent with the numbers reported for previous Decembers, which as noted earlier tends to a relatively quiet period for housing related activity," Zumpano said.

It was the same story at the national level, Zumpano said. "For 2001, existing home sales for the U.S. increased by 2.7 percent, another record, but a smaller increase than reported for Alabama. As was the case in Alabama, U.S. existing home sales in December also declined, but by only by 0.8 percent," Zumpano said. .

Zumpano said a number of factors have contributed to the surprisingly strong housing market. "Because mortgage interest rates have remained at or near historic lows throughout the year, housing affordability has remained at near record levels," he explained. "Unemployment rates, although rising through most of 2001, are still low compared to prior recessions, and household income has continued to increase. The fact that the stock market has remained depressed and quite volatile has, somewhat ironically, encouraged more investors to take their money out of equities and put it into real estate, whether in the form of a larger home, second home or time share."

He said the record setting pace at both the national and the state level is "nothing short of extraordinary given that the National Bureau of Economic Research declared a recession began in March of 2001." He noted that the Commerce Department reported that gross domestic product (GDP), the broadest measure of economic activity, actually grew at 0.2 percent in the fourth quarter of 2001, which means that the United States actually dodged the general definition of a recession which is defined as two consecutive quarters of GDP contraction.

Most economists predict that the United States will be well on the road to recovery by mid-year. Zumpano said some signs of strength are already evident. "Consumer confidence jumped 2.9 percent in January to 97.3 from 94.6 in December. The economy lost only 124,000 non-farm payroll jobs in December, a much smaller decrease than November’s loss of 371,000 jobs. Employment is generally one of the last indicators to change as the economy turns around, so there may yet be more increases in unemployment. For the housing sector, new home sales were up 6 percent in December to 946,000 units from 895,000 units in November. Building permits issued for privately owned housing units was up 4 percent to 1.653 million permits over November’s 1.553 million permits."

The outlook for the housing markets at both the state and national levels is good, according to Zumpano. "Some gains in housing affordability will likely be lost when mortgage rates begin to edge back up, but housing is still extremely affordable by historical standards. This will likely cause some tightening in the housing sector, but the market has survived unscathed in the current economic environment and it will likely remain strong in the near-term," he said.

The Alabama Real Estate Research and Education Center, located in the Culverhouse College of Commerce and Business Administration at The University of Alabama, is a state of the art comprehensive research facility designed to support Alabama’s real estate community and the state’s overall economic development efforts.