Alabama Real Estate Market: What to Expect in 2024 and 2025?

The current median home sale price of $293,400 is rising slowly at just 2.9% YoY. Moreover, homes have been sitting on the market for 50 days. This indicates that the real estate market in the Cotton State is now slightly less competitive.

Additionally, only 5,437 homes were sold in June 2024, down from 5,976 in the previous year. This decline suggests sellers are receiving fewer offers, mainly due to the recent NAR settlement. Concerns about selling prices and agent compensation have contributed to this market sluggishness.

The NAR settlement has removed the buyers’ agent compensation from the MLS. This may drive down home prices further. As a result, buyers will have improved affordability along with low mortgage rates.

Here are some tips for you to sustain in Alabama’s housing market:

• If You Are a Home Buyer: With an inventory of 24K properties and the potential for further price drops, now is a good time to buy your new home. The low interest rates at 6.38% are also in your favor. Consider negotiating for seller concessions to further benefit from the purchase.
• If You Are a Home Seller: The correction in the home prices is long overdue. In the wake of the NAR settlement, home prices may drop a little more. If you’re a seller, you can still make profits on home sales before prices potentially drop.

So, How Is the Real Estate Market in Alabama?

Balanced!

The number of homes for sale increased by 20% in June 2024 compared to the previous year. This is the 10th consecutive month the housing market has witnessed such growth. Single-family homes for sale are up by 15.7%, and condos by 37.3%.

• Median Days on Market: The median days on the market for homes for sale is 50 days, up by 11 days YoY. This trend suggests a cooling demand in the Alabama real estate market.
• Housing Inventory and Supply: As a buyer, you have more options now as the housing inventory is up by 18%. There are 24K homes for sale in Alabama, with an average supply of 3 months.
• Average Home Prices: The median home price in Alabama is $293,400. But, it is expected to decrease due to a rise in inventory in the latter half of 2024. The sale-to-list price ratio is 98%, dropping by 0.44 pt YoY.
• Home Sales: As per June 2024 data, home sales decreased by 9.94% YoY! Only 5,471 homes were sold, compared to 6,074 homes last year.
• Average Rent Prices: Rental costs vary statewide. An average tenant in Alabama pays $2,538. You should check the local rates in your region.

Data Sourced From: Redfin

Why Is Alabama a Buyer’s Market Now?

Buyers have more options to explore. Additional housing supply can balance the Alabama real estate market and stabilize home prices. Let’s look at some more facts:

• More Days on the Market: Homes are spending more days on the market. This is visible in metro cities like Birmingham, Huntsville, and Montgomery, where the average days on the market are between 48 to 56 days.
• Low Housing Demand: The demand in Pelham is low, with only 40 homes sold in June, down from 50 last year. This is a significant 20% decrease from the previous year.
• More Homes Have Price Drops: In June, 25.2% of homes experienced price drops, compared to 14.3% last year. This trend indicates a gradual shift toward a buyer’s market.
• Low Mortgage Rates: Mortgage rates remain near historic lows, ranging between 6.54% to 6.66%. So, this is a great time to lock in a low rate and get pre-approved for a mortgage now.

Alabama Real Estate Market Predictions

Here are the predictions for Alabama’s housing market in the remaining months of 2024 and 2025:

1. Number of Home Buyers Will Increase: As inventory grows and homes stay on the market, more home shoppers are expected to re-enter the market.
2. Interest Rates are Expected to Drop: Mortgage rates hit 6.34% in July 2024. NAR predicts the average interest rate will drop to 6.3% by year-end. This will encourage more buyers to apply for loans.
3. New Home Constructions Will Shoot Up: 33.4% of single-family homes for sale in Q1 were newly built. This rise in home construction will continue due to increased demand from remote workers and favorable mortgage rates.
4. Home Prices Will Drop: After a period of sluggish growth, home prices are expected to begin a gradual decline.
5. iBuyers Will Continue to Make Lowball Offers: iBuyers like Opendoor and Offerpad, which once offered 104.1% of market value in 2021, now offer around 70%. Such lowball offers to sellers will increase opportunities for individual buyers.

Bonus Predictions: Buyer Broker Commissions Will Be Zero!

In a shocking turn of events, the NAR settlement has completely eliminated buyer agent fees from the MLS. Let’s understand its impact:

1. Buyer Agents Will Be Affected: With buyers now responsible for directly paying their agents, many may choose to find their homes on their own. This may very soon render buyer agents obsolete.
2. Seller Concession Will Increase: Without the obligation to pay buyer agent commissions, sellers might see increased requests for seller concessions and offline transactions. Additionally, builders are offering significant concessions to attract buyers, further influencing the market dynamics.
3. Builders Will Compete More: Home builders are persuading buyers to buy new construction homes with mortgage buydowns worth $30K!
4. Sellers May Offer Fees for Services: Sellers may offer at least 1%-2% fees to the buyer agents in order to sell their homes quickly. Increasing competition from builders may also cause sellers to pay extra fees to buyer agents.

Is the Housing Market in Alabama Going to Crash?

A housing market crash in Alabama is unlikely. Alabama’s real estate market is expected to remain competitive due to out-of-state buyers and its affordability. With 30% of prospective homeowners eyeing the beautiful properties in Birmingham, the housing demand is likely to remain high.

Birmingham’s real estate market is expected to remain competitive due to its affordability and growing popularity among out-of-state buyers. With 30% of prospective homeowners eyeing the city’s beautiful properties, the demand for housing is likely to remain high.”

The job market remains robust, with an unemployment rate of just 2.8%. Additionally, the average cost of living in Alabama is $39,657, significantly lower than the national average of $61,334.

This affordability, combined with strong economic fundamentals, makes a housing market crash in Alabama unlikely.

2024: Is It a Buyers’ or Sellers’ Market Now?

The housing market is expected to lean more in favor of the buyers in the latter half of 2024. Home prices are rising slowly, and the number of homes for sale has increased by 39.8% YoY. Buyers now have more choices.

With mortgage rates around 6.05%, buyers also have more purchasing power. Consequently, more homeowners are likely to list their homes on Alabama MLS. The 3.6% increase in new active home listings in Alabama has brought back home shoppers.

So, whether you are looking for a condo in Florence or a single-family primary home in Millbrook, you will find your dream home in the coming months.

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Disclaimer: This article is for informational purposes only. It does not constitute an offer, solicitation of an offer, or any advice or recommendation. Houzeo doesn’t provide any legal or financial advice. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Houzeo Corp., its affiliates, or its employees. However, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any investment decision.

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