The Huntsville Area Association of Realtors (HAAR) has released its annual report for 2023, as well as the report for the month of December specifically.

2023 was a year defined by the interest rate shock, which reverberated throughout the entire real estate market. Would-be buyers found homeownership a more daunting prospect as 30-year fixed mortgage rates hit a two-decade record high.

At the same time, current homeowners were put off at the prospect of losing out on the far lower rates of their previous mortgages, and opted to “lock-in,” and attempt to wait out the high mortgage rate shock, keeping their homes off of the market. This exacerbated the existing inventory shortage, which in turn drove up competition for those would-be buyers, who frequently found themselves frustrated in their attempts to enter the market.

All of these issues had empirically-quantifiable impacts on the numbers for 2023. Pending sales across the entirety of the ValleyMLS.com service area, of which Madison County is a part, declined by 11.2% in 2023, representing a total of 12,474 sales. Closed sales declined by 18.5%, representing 12,364 sales.

Moreover, sellers received an average of 98.3% of the list price at sale, a year-over-year decrease of 1.6%.

Of particular note is the trend against larger units. While closed sales were down across all size ranges, the greatest decrease was found in the 2,001 – 2500 square foot range, which saw a decrease of 19.8% from the previous year. The decrease for units in the 2501 – 3000 square foot range was not as great, but it still represents the smallest amount of units sold in 2023, at only 1,384 closed sales.

The greatest number of closed sales were made for units in the 1501 – 2000 square foot range, with 3,712 units sold.

The vast majority of units sold in 2023 were in the $159,000 or more range, with 11,177 units sold. However, this represents a decrease in sales of 16.4%, as there had been 13,368 units sold in 2022.

While these higher-priced units dominate the market, there is evidence of interest in more affordable units; units in the $69,000 – 98,999 range were the quickest to be sold, spending an average of only 28 days on the market, while their more expensive counterparts spent an average of 35 days on the market.

The report does show that homes in Huntsville, specifically, sell slightly faster than elsewhere in Madison County. The yearlong average days on the market across Madison County was 31 days, while units in Huntsville specifically sold in an average of 28 days in 2023.

The monthly report for December shows signs of increased market activity in the Huntsville/Madison County market.

There were 786 pending sales in December. Closed sales hit 524, down slightly from the previous December, which saw 538 sales.

The average sales price in Madison County increased to $382K, up from $366K in 2022. The average days on market continued to slow, reaching 39 days, compared to 22 the previous year. However the inventory on the market continued to build, increasing from 1521 units available in 2022 to 1811 in 2023.

So, where does this leave us for 2024?

Barring unforeseen catastrophe, the Federal Reserve has signaled a willingness to ease off the interest rates for 2024. Its December announcement set a target rate of 5.25% to 5.50%, likely over a series of gradual cuts over the course of the year.

“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news,” Federal Reserve Chair Jerome Powell said in a press conference. The Federal Reserve feels confident that the inflation issue has been successfully brought under control, where it will hit its target rate of 2% by the year 2026.

An easing of interest rates could well entice potential sellers out of their lock-in stance, which, in turn, would ease some of the chronic inventory shortage that has plagued the entire market. Experts are split, on what this could mean for housing prices moving forward; a potential influx in inventory could result in a modest decrease in price, as sellers compete for buyers. However, the potential influx may not be large enough to accommodate the backed-up demand for housing, either keeping prices steady or otherwise failing to ameliorate the rising costs.

Either way, the Huntsville Business Journal will continue to monitor the market and report on developments as they occur.