So What’s Happening With Birmingham Home Prices?

Birmingham Home Prices During A Pandemic

As a real estate appraiser, I am seeing first hand and in real-time what is happening with Birmingham home prices during the COVID-19 pandemic. We have never experienced a viral outbreak like this in our lifetime so every day and week we go through this is unchartered territory.

Birmingham Home Prices During The Pandemic

As everything in real estate is location-specific so are housing statistics. We can read the national news about what is happening with real estate but does it really pertain to us at the local level?

We can get a general idea of how the real estate market is doing by listening to the national news but if you want data that you can really use you need to pay attention to what is happening locally. This is one of the main reasons I write my blog: I want to put data in the hands of the locals so that they can make informed decisions that impact their lives, whether you are a real estate agent or a homeowner.

This week I continue to share statistics and charts that illustrate what’s happening with Birmingham home prices. I hope it is helpful and informative to you.

Things I’m Seeing

Active inventory levels are increasing – Low inventory levels are slowly rising. This is good news for buyers because it gives them choices. Limited inventory means it is a seller’s market and they can dictate price within reason.

Birmingham Area Active Listing Trends June 2020

With more inventory, there is more competition and this helps to normalize prices. Following the announcement of the pandemic during the second week of March, a spike in homes temporarily taken off the market occurred.

In addition to an increase in homes taken off the market, there was a slight decline in new listings. Both of these actions contributed to a lower number of homes available for sale, however, it now appears that active listings are starting to rebound. In mid-April, approximately one month after lockdown, active listings have started to increase. 

More backup contracts and contracts that are over list price – Birmingham’s real estate market has been strong during the pandemic. While inventory levels appear to be increasing they have been lower than normal over the past couple of months.

With the increased demand, due in part to low-interest rates, I have seen more backup contracts on purchase appraisals. Many properties have two or three backup contracts and many are above list price.

This is not uncommon in an increasing market with limited inventory. Buyers are aggressively placing offers on properties that are already under contract because they don’t have any other choice.

While placing an over contract offer on a home may work you really need to be careful because it may not appraise. It’s not always the best strategy to take the highest offer because of this.

It’s important to have an agent familiar with home values so they cant provide helpful feedback about the amount of the offer. A deal could fall apart because the appraisal cannot support the contract amount. This can be a tremendous waste of time for all parties involved.

Sales volume has declined – Even with low-interest rates fueling sales, volume did slack off after the pandemic was announced. This may have been caused by buyers feeling unsafe about going into houses.

This was initially noticed by MLS Showing Times when live showings dropped off. There was a noticeable difference in live showings, however, in the Birmingham area agents adapted rather quickly by offering virtual tours.

Alabama Showingtimes

Even with the online showings and social distance closings sales, volume did show a decline. This was not a surprise given everything that has been happening.

Birmingham Area Sales Volume in units June 2020

We’ll have to keep an eye on how long the decline in sales volume lasts. It may just be a blip in annual stats, or it could signal a trend that sellers will need to pay attention to as this information will help determine pricing strategies that sellers use.

Months of housing supply is increasing – When you have sales volume declining and inventory levels increasing the months of supply will increase.

This may be seasonality or natural fluctuations in the market. As long as the months of supply do not get too high it should stay in balance.

Birmingham Area Months of Housing Supply June 2020

Different areas vary but anywhere from 4-6 months is considered a balanced market. Anything less than this would be a seller’s market because there is not enough inventory to satisfy demand and anything more than 7 months would be a buyers market because there is too much inventory.

Mortgage applications are up – As of mid-May, applications for mortgages applications to purchase homes were up 6.7% over last year according to the Mortgage Bankers Association. This is in spite of an ongoing pandemic, however, it is most likely due in part to record low-interest rates.

The numbers are up 54% from early April but that is not saying a lot since we had just gone into lockdown mode due to COVID-19. With restrictions easing and most people out of quarantine demand has resumed in full force. At the same time, refinance applications have dropped off.

With interest rates continuing to stay low this activity is expected to continue into the foreseeable future.

Question

So now you know whats’s going on in the Birmingham real estate market. If I can answer any questions you have please let me know and as always, thanks for reading.

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Comments

  1. Nice job Tom. My market has been somewhat flat in terms of prices, but there is still upward pressure in some price ranges. It seems like overall county and regional metrics started to slow about a month earlier than they usually do. I’m anxious to keep seeing thing. I look forward to hearing about your market also.

    • Thanks, Ryan. We are starting to see increases in prices due to limited inventory along with offers that are above list price and multiple contracts. This is something new for our area. Historically we have been a pretty stable market with average price increases.

  2. Hey Tom, great summary. We’re seeing similar trends out here. Supply and demand fell off at somewhat similar rates initially so we saw a drop in activity but not in prices. Activity is starting to pick up again but still depressed.

    • Thanks, Joe. Overall I think sales volume is down in our area but if the market continues to heat up I can see previous years numbers being exceeded.

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