Birmingham Real Estate: 2019 vs 2020

Birmingham Real Estate 2020 Recap

Is it too late to discuss how the Birmingham Real Estate market in 2020 compared to 2019? I had hoped to write about this sooner but I have been extremely busy appraising. Maybe the fact that the real estate market barely let up for the holidays is a good indicator for 2021.

It’s no surprise that 2020 was a record-setting year in home sales in spite of the pandemic. Among other things, it was no doubt brought on by the reduction in mortgage rates.

Take a look at this interesting visual by Len Kiefer who is the Deputy Chief Economist for Freddie Mac.

The average interest rate on a 30-year fixed-rate mortgage dropped below 3% last year, which was the first time ever according to Freddie Mac. This cheap money-motivated many people to buy a home which in turn helped contribute to the record sales.

So what impact did all of this have on Birmingham home sales? In the past, Birmingham tended to be a rather stable market with fewer variations in home sales and appreciation compared to other parts of the country.

This was not true for 2020 as the increased demand brought on by low-interest rates and even lower housing inventory resulted in an aggressive market that saw an increase in homes selling for more than list price. An additional result was an increase in multiple offers for homes.

The hot market left many purchasers out in the cold due to outbidding by other buyers, no pun intended. I discussed some of what was going on in a recent post about overbidding in a hot real estate market if you want to check that out.

Here are some charts I put together to help visualize the market in 2020:

Birmingham Area 2020 Market Recap

The above charts tell a story of the Birmingham real estate market. Here are some highlights from the charts which were created using data supplied by the Greater Alabama MLS.

• The number of homes sold in 2020 increased by +8% over last year
• Monthly home sales were greater for every month in 2020 compared to 2019 with the exception of April and May, the two months following the announcement of the pandemic.
• The average number of days for a home to go under contract dropped +47% from 2019 to 2020
• The number of active listings continued to decline in 2020. There were a little over 5,000 listings in 2019 at the high point and a little over 4,000 for the high in 2020.
• The months of supply of homes is declining due to the decrease in active listings and increase in sales. January is historically the month with the greatest amount of supply or inventory.
• The days on market have steadily declined over the last several years and declined by 26% in 2020 from the year before. The days on market were lower every month in 2020 compared to 2019.
• The monthly median sale price has continued to rise since 2016, the time covered in this analysis. Prices dipped shortly after the pandemic began to a level lower than the year before. After rebounding the gap between 2020 and the prior year exceeded the year-to-year difference between all prior years back to 2016. The prior health of the real estate market contributed to the quick turnaround to pre-pandemic levels.
• The sale price to list price ratio was slightly higher in 2020 compared to 2019 indicating a tighter market with sellers less willing to lower their price and buyers offering a higher price to win a contract.

Key takeaways for 2021

• If interest rates continue to be low there will be more housing demand as potential buyers enter the market to take advantage of the cheap money that is available.
• There could be some easing of the market if there is an increase in new home construction, however, this will take time for more homes to come on the market.
• With the ability to work from home there may be an increase in buyers looking for larger homes because they are there more and need the space.
• With an increase of buyers and a potentially low inventory, the competition for the limited housing stock will possibly lead homeowners to stay in their homes and add on or update what they have. This could continue to drive mortgage activity to higher levels than last year.
• The potential also exists for foreclosures to increase if people cannot get back to full-time work. If foreclosures do increase it may be good news for buyers to get a good deal on a home.

At best these predictions for the real estate market in 2021 are only an educated guess. Only time will tell how 2021 unfolds, however, if the first two months of 2021 are any indication of how the rest of the year turns out we’re in for a wild ride.

Question

Do you have any thoughts on how 2020 turned out or any predictions about what lies ahead in 2021? Leave a comment below and as always thanks for reading.

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