The national real estate market has entered a period of cooling, as the combination of restricted inventory and high interest rates have driven down sales.

According to Redfin, which compiled a four-month report which concluded on June 30th, pending sales have declined an average of five percent over the four months.

Despite this decline in pending sales, the median sales price continued to build to what Redfin is reporting as an “All-time high.”

The situation here in Huntsville is a bit different from the national context. According to a weekly report compiled by the Huntsville Area Association of Realtors (HAAR), for the week ending June 22, 2024, pending sales have continued to increase across the Huntsville/Madison County market.

Pending sales of single-family homes increased by 9.4%, while townhouse/condo units saw a 57.1% increase.

New listings increased by 4.8% for single-family units and 60% for townhouse units. Meanwhile, inventory continued to increase, with a 19.2% increase of new single-family homes and a 76.2% boost in townhouse units.

So, to buy or not to buy – that is the question.

According to Freddie Mac, the average mortgage rate for a 30-year fixed mortgage sits at 6.97%. Fannie Mae projects that the rate will see a slight decline by the end of 2024, estimating an average rate at or around 6.7%.

Realtor.com reports that, nationally, inventory increased by 35.2% over the month of May, relative to May of the previous year. This marks the seventh consecutive month of year-over-year inventory increase, but even this increase still fails to bring housing inventory up to 2017 levels.

The Federal Reserve expected to gradually begin lowering interest rates over the course of this year, but stubbornly-high inflation has caused it to repeatedly delay it, with the first decrease expected to occur sometime in fall or winter of this year.

The demand for housing has remained elevated, even as potential buyers have been dissuaded from, if not outright priced out of, buying over the course of these last two years. While inventory has continued to come online, it still is not sufficient to meet the demand of the 71 million millennial Americans who are entering the home buying stage of their life cycle.

What all of this means is that housing prices could remain high, and increase as time goes on, as expanding housing is a complicated process, involving the additional construction of the supporting infrastructure to accompany these homes, such as roads, power, and sewage facilities.

A huge backlog of increasingly-desperate buyers looking for homes means that, when the interest rates begin to lower, those who had previously held off could well decide to throw their hat into the arena, keeping housing prices high.

In any event, irrespective of the national market, Huntsville itself remains a highly-desirable market, with its status as a hub of the federal defense industry. As such, while the median sales price remains lower than the national average, our local real estate market is likely to remain brisk for some time to come.

As always, the Huntsville Business Journal recommends consulting professional realtors and mortgage financial officers before making the decision to buy or sell a home. The HBJ will continue to report developments in the real estate market, both locally and across the nation.