Real Estate Update: Sales down amidst uncertain environment

The National Association of Realtors (NAR) has reported that, across the United States, pending sales of residential units has declined 4.6% on a month-by-month basis, and 5.2% on a year-over-year basis. 

Of the four regions of the United States, only the Northeast saw a slight increase in pending sales on a month-to-month basis, while all four regions saw a year-over-year decrease. 

The Huntsville Area Association of Realtors (HAAR) released its weekly report on the Huntsville/Madison County area, dated to the first week of March. The report shows a decline in pending sales of single-family units of 6.9%, while townhouse/condo units saw a decline of 7.7%. 

Inventory of single-family units increased 16.7%, while townhouse/condo units saw a 37.9% increase. The types of homes hitting the market show a distinct split, with new listings of single-family homes up by 5.7%, while townhouse/condo units had a decrease in new listings of a flat 40%. 

The February monthly report showed that homes in the Huntsville/Madison County area have been spending longer on market, with single-family units spending an average of 67 days on market. 

There are many factors that can explain a cooling market, but they all ultimately come down to uncertainty. Huntsville depends on the income of Federal workers and contractors working for the Federal government in some capacity, and many of those workers face uncertainty as to their jobs, with DOGE making broad, sweeping cuts. While many of the worst cuts bypassed the Rocket City, being ordered to justify one’s continued employment via email understandably makes many such workers considerably less likely to make big purchases, such as homes. 

As more apartment units become available, Zillow reports that the average rent for an apartment in Huntsville is $1,433 per month, significantly lower than the national average of $2,050. This makes renting an increasingly attractive option for those concerned about long-term financial commitments and the ability to afford rising mortgage rates.

This uncertainty is also affecting the inventory crisis in residential real estate, albeit from different angles. The National Association of Home Builders sent a letter expressing their concerns to President Trump about the potential effects of tariffs on the construction industry. The NAHB Chief Economist, Robert Dietz, explained the reversal of momentum on housing starts experienced during January and February to the uncertainty surrounding these tariffs, saying that “policy uncertainty and cost factors created a reset for 2025 expectations,” adding that “uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023.”

With tariffs against Canada and Mexico coming into effect on March 4, the price of construction materials such as softwood lumber could rise by estimated 10% over the course of 2025, according to CoreLogic data. 

Ramping up domestic US production of such materials isn’t a simple matter either. Canada currently provides 30% of softwood timber available in the United States. While the lumber industry may salivate at the chance to cut down more trees, efforts to harvest from Federal lands on such a scale are likely to run into legal challenges, delaying the off-setting of the loss or increased cost of the timber supply. 

This, of course, assumes that the United States does not follow through on President Trump’s repeated threats to outright invade and annex Canada in order to seize their natural resources.

While a war of northern imperialism would be one way to shore up Huntsville’s ballistics and rocketry industry, war is the ultimate uncertainty, and has a way of blasting plans to dust. 

Every business in the Western world has to reckon with this uncertainty when attempting to account for the future. This uncertainty makes consumers nervous, and nervous consumers hoard necessities and hunker down. This affects demand, and obfuscates economic markers that the Federal Reserve relies on to determine interest rates and control inflation. 

These are most assuredly interesting times. 

The Huntsville Business Journal will continue to monitor developments in the market, both nationally and here at home.