Alabama Real Estate Market Update

Mid-Year 2023: A story of thirds

Most states are reporting decreased sales volume but increasing median sale prices. That’s not the case in Alabama’s latest monthly home sales report. While its closed sales in July 2023 dropped by almost a third, so did its median home sales. Take a closer look at what’s happening in the Alabama real estate market.

Alabama statewide look

Alabama had 6,084 home sales close in July 2023, 33% less than the prior year. Year-to-date (YTD) sales were down dramatically to 25%. That’s the lowest closed sales rate over the last five years. 

This mirrors the nationwide trend of reduced closed home sales. It’s been brought on by a combination of factors: record-high mortgage interest rates, homeowners deciding to hold onto their homes, and inflation reducing buying power. 

Typically, because the buyer pool is diminishing in lockstep with the declining inventory, the state real estate markets have seen median home sale prices continue year-over-year (YOY) gains. That isn’t so in Alabama, where the median sales price dropped 7.5% to $228,030 for July 2023. On the bright side, that median price was the highest recorded for the year-to-date, and it did increase slightly on a month-to-month basis.

Year-to-date sale prices were also down by 6.7% to $215,431. The state’s median sale price peaked in July 2022 at $246,570. Still, the Alabama real estate market has reported year-over-year decreases since November 2022.

The double reduction in inventory and sales prices has impacted the state’s sales volume, in total unit closed sales and dollar volume, where Alabama is down 33% for the year.

But the state is still in a seller’s market with a three-month supply of homes. Buyers will be happy to note that it’s a 60% increase YOY and 56% for the YTD. Active listings were up 9% YOY and 41% for the YTD. 

Overarching economic factors impacting real estate

Alabama’s economy was chugging along strong in the summer of 2023. The unemployment rate was near record lows (2.2%), and its gross domestic product (GDP) did increase for the first quarter. It added 8,400 new jobs in June 2023, a high for the past twelve months. State job growth has stayed in the positive since the early days of 2020. 

Still, the high interest rates and inflation are challenging Alabama home buyers’ purchasing power, which may be contributing to the drop in median sale prices and sales activity. 

Future Alabama real estate market activity

The Alabama Association of Realtors expects home sales figures to continue to drop in the coming months, especially if mortgage rates remain near or above 7%. Home sellers can anticipate longer days on the market, from 58 in July 2023. This will help the monthly supply of homes to keep its upward trajectory, as will the more homes expected to come to the market.

There’s also some optimism that the downward swing in median home prices is reversing, given how July’s median sales price was the highest for the year and part of a month-to-month upward trend.

The numbers suggest Alabama may reach a more balanced market before many other states. The real estate market was last at its five-year high, 3.5 months, in April 2018. 

Another noteworthy item is the number of new housing permits has been rising in Alabama since the start of the year. This signals the housing stock is increasing, which could improve housing affordability.