Monthly Figures Kick-Off Sluggish Market for the New Year
The Huntsville Area Association of Realtors (HAAR) has released its monthly figures for December of 2022. The report caps off a year defined by the rapid deceleration of the market via inflation and interest rate hikes.
Nationally, pending sales have dropped by 37.8% from December of 2021, as reported by the National Association of Realtors (NAR). This effect is blunted here in Huntsville, with a decline in pending sales of 15.6% from the previous year.
Houses on the market are staying on the market longer, up 83.3% for single-family units, up to 22 days on average. However, this pales next to the increase of days on market for townhouse units, which has exploded 400% from December 2021, up to 25 days on market up from a mere 5 days on average previously.
The national inventory of homes for sale increased by 54.7% compared to December of the previous year; however, even that increase has not fully opened the squeeze on inventory brought about with the pandemic, as it remains 38.2% smaller than in the pre-pandemic year of 2019.
Here in Huntsville, the market saw an 87.9% year-over-year increase in inventory. However, even with that higher rate of growth, the intense continuing demand for Huntsville results in a monthly housing supply of 2.5 months, lower than the national 3.3 month figure.
The Housing Affordability Index continued to hover at 82 for single-family units, which is to say that the median household income for the market region covers only 82 percent of the cost to qualify for the median-priced home at prevailing interest rates.
Interestingly, townhouse units actually rose to 99 on the index, up from 82 in November; however, this still represents a 40.4% decrease from December of 2021, and the reality remains that even the average townhouse remains too expensive for the median household to afford in Huntsville.
The inventory has risen, and the demand for housing in Huntsville remains unmet, and yet pending sales have declined anyway.
How can this be?
The high rate of interest dilutes the buying power of each dollar, adding hundreds to mortgage payments and making it difficult, if not impossible, for many to secure financing to purchase real estate.
Additionally, many would-be sellers are holding on to their property to wait out the freeze, keeping prices from declining too quickly. The average price of a single-family unit hovers at $327,000. This is still lower than the national average of $454,900; what remains to be seen is if the Huntsville real estate market will buck the projected price decline economists expect to see nationally over the coming year.
Taylor Marr, Deputy Chief Economist for the Seattle-based real estate firm Redfin, predicts a national decline in sales of 16% over 2023, writing that “People will only move when they have to.”
With that said, it is unlikely that the housing market will crash 2008-style. Writing for MarketWatch, LendingTree senior economist predicted that “Home prices won’t necessarily fall everywhere, but a combination of relatively high rates and weak homebuyer demand will likely push down prices nationwide in 2023. While a 5% and 10% drop may seem steep, declines this year are unlikely to wipe out the home price gains many houses saw over the past few years.”
As long as financing a home remains out-of-reach for many households, rent will continue to be high. According to realtor.com, the national rent average increased 3.4%, to a national average of $1,712 per month.
Here in Huntsville, the average rent stands at $1,151 per month. For the average individual in Huntsville, the yearly income is $30,854. The average individual spends nearly half their income on rent, with many spending more depending on variations on income and rental prices.
This has ramifications across the economy, as discretionary spending is squeezed out by necessary expenditures for housing, vehicular costs, healthcare, and other such costs of living.
It is unlikely that the market will pick up much before spring, barring any unforeseen developments. The Huntsville Business Journal will continue to monitor the housing market, both nationally and here at Huntsville, and keep our readership informed.
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