Real Estate Update: Affordability still a concern as government shutdown postpones

Housing affordability still remains a top concern, both here in Huntsville and across the nation as a whole. The Huntsville Area Association of Realtors (HAAR) report for the month of August showed a slight increase in the average sales price of a single-family home in the area, up 1.1% to $370,000. While this figure is still well below the national average, it still represents a significant hurdle to home ownership. 

In fact, in a curious side-effect of affordability woes, a new report from the U.S. Census Bureau states that nationally, the median floor square footage of new single-family homes has shrunk in 2023. 

For Q2 2023, square footage shrunk 2.9%, down to 2,191 square feet. This is the lowest median square footage reported since 2010. According to the Census Bureau, while the median square footage of houses briefly ballooned during the pandemic, it has been dramatically shrinking since Q3 2022, as homeowners respond to demands from would-be homeowners for smaller, more affordable housing options. 

As expected, the Federal Reserve opted to maintain current interest rates during their meeting last week, waiting to see the market response to current rates. Though prospective homebuyers won’t have to contend with another interest rate hike at this time, a legislative standoff in Washington D.C. threatens to disrupt the market here in Huntsville.

The good news is that the Federal Government did pass a temporary bipartisan bill that includes government funding until November 17, but a permanent solution has yet to appear. This, of course, is bad news for a town as dependent on Federal money as our Huntsville. However, this bipartisan temporary push does quell some home buyer and seller anxiety heading into the first week of October where, according to Realtor.com, statistically it is the most optimal time of the year for would-be homeowners to buy a house. 

“Ideally, this week will offer buyers more options at lower-than-peak prices, as well as less competition from other buyers and slightly more time to deliberate,” says Hannah Jones, senior economic research analyst for Realtor.com. 

The Realtor.com report figures that homebuyers could save an average of $15,000 by buying during this week, during which the demand will be at its lowest, maximizing bargaining power for those looking to buy. 

What the temporary House and Senate deal does is a avoid a potentially painful scenario where people unsure as to the state of their next paycheck are extremely unlikely, at best, to engage in such a large transaction as buying or selling real estate – assuming that they even could, given the need for tax assessment, Federal Housing loans, or other services that could be unavailable in the event of a government shutdown.

What is unclear is if the House and Senate will be able to reach a permanent deal by the new November 17 cutoff. Worse still is the possibility that the shutdown will end up sending interest rates higher, which, as we’ve just established, the Federal Reserve just explicitly resolved to avoid for the time being. A short shutdown would resolve back into equilibrium relatively quickly, but a longer shutdown, with more unpredictability in the market, would cause more serious disruptions. 

The Huntsville Business Journal will continue to monitor market developments as they occur.