Everybody keeps talking about how good the Birmingham, Alabama real estate market is compared to past years, so I thought I would take a closer look. There are certain key statistics that need to be performing well for the market to be healthy. Lets take a look at some charts to see if we can understand what’s happening. Just so you will know, I have included charts published by the Birmingham Multiple Listing Service as they have compiled some very helpful information.
Number of Homes Sold
The number of homes sold is a good statistic to look at if you want to gauge the confidence of the market. In the past we have seen sales volume be down because buyers did not feel comfortable purchasing a home for various reasons including uncertainty in their jobs. An increase in sales volume indicates buyers are now more confident and they feel the economy is doing better. Up through March of 2013 the number of homes sold has increased by almost 7.5% compared to the same period in 2012 and by over 9% since 2010. A softening stance on loaning money could also be making more funds available for buyers.
Median Sales Price
For January through March of 2013 the median sales price of homes in the Birmingham, Alabama market has surpassed the first 3 months of every year since 2010. The total of median sales prices for January through March of 2013 totaled $436,900, which exceeds the next highest total by almost 7.5%. The median sales price is a better indicator than the average price because it is less effected by the high and low factors that may have occurred. Occasionally an outlier sale will occur for various reasons, it could be a very low foreclosure sale or maybe even a home that sold for a higher than normal amount. The median sold price statistic will not be effected by these types of sales.
Total Number Of Foreclosure Sales
Throughout 2012 and the first quarter of 2013 I have noticed a decrease in the total number foreclosure sales. This is important for two reasons. The first of which is that the lower number of foreclosure sales you have the less likely they are to bring the median price down. As you might expect, foreclosure’s sell for a significantly lower amount than traditional arms length sales do. Like the other statistics mentioned above, the first 3 months of 2013 have seen a decrease in the total number of foreclosure sales. The second reason is that with less competition from foreclosures that are for sale, the more non-foreclosures will sell which should bring up the median price. This statistic is also tied directly to the next one I want to discuss.
Percentage Of Foreclosure Sales
In February of 2011 foreclosures made up approximately 43% of total sales, which is the highest amount for the first 3 months of the year back to 2010. March of 2013 marks the lowest percentage of foreclosures since January of 2010, at 27%. As I mentioned previously, the less foreclosures you have in the market the less effect they will have on the median sales price. I think the banks have finally discovered that flooding the market with foreclosures was not a good idea. It appears they are slowly releasing them into the market, which has helped to start a recovery.
One of the biggest things that is driving a current spike in sales prices in many areas is the decrease in active listings. It all goes back to the basic principles of supply and demand. The less there is of a product, the more the products price will rise. The amount of active listings is at its lowest since 2007, with 7,506 homes currently listed according to Birmingham MLS records. This is up slightly from January’s number of 6,962, however an increase in inventory from January to March is not uncommon. The fact that there are less foreclosures has also resulted in the lower inventory.
As you can see by looking at these 5 key statistics, the Birmingham area real estate market should see some positive growth this year if the release of foreclosures is controlled and active listing inventory does not increase significantly. Can you think of any other statistics that we should look at to measure the health of our local market? Leave me a message I would be interested in hearing from you.
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