COVID-19 & The Current Birmingham Metro Real Estate Market and the likely future trends…
Current Birmingham Metro Real Estate Market and the likely future trends…
When making a decision to buy or sell in the current environment, it is essential that each person be aware of not only the current market and what is likely to happen in the months to come. The information presented here is based on the general real estate market in the metro Birmingham Area, which includes, Jefferson, Shelby, St Clair, Talladega & Blount counties. It is important to note that this market area is comprised of literally thousands of micro markets. Each micro market area is influenced by the factors discussed here but not necessarily in an even way. So for a more detailed view of the micro market of greatest concern to you, we would need to begin with the exact location that you are interested.
With that in mind, lets begin with the current status of the market in the 5 county market area of the Birmingham Metro Area. Since at least mid 2018, we have had an increasingly low inventory of single-family homes for sale in this market. Currently (May 10, 2020), there are 3,797 Single Family homes for sale (not under contract) for sale in our market. The current average number of Single Family homes sold per month during the last six month sales is: 1412. With an inventory of 3,797 Single Family homes for sale there is only a 2.7 months inventory of homes for sale based on the current sales rate. This is a very HOT Market (Seller driven) especially for homes priced below $250,000 (the upward boundary for starter homes).
On the home building front most of the major builders have pulled their horns in substantially. Inventory will continue to be a problem for the near-term foreseeable future.
This is an extremely competitive market and is advantageous to the seller. Sometimes, homes will sell as soon as they are listed. Typically, during a hot market, multiple offers will be made on a home and more often than not, homes will sell for more than the asking price if priced appropriately. In a normal or balanced market will have between a 5-9 month window of real estate inventory. What this means is that if no other home ever came on the market, all the current homes on the market would sell within 5-9 months in a healthy/balanced market.
This truly reflects what we are experiencing in the market, almost any home in a desirable location in decent condition will go under contract within 15 days and multiple offers are highly common. Many homes are selling above list price with fewer concessions made by Sellers than has been typical for the past 10 years.
This obviously creates a tough market for Buyers. But before Sellers celebrate too much, the are a few caveats. As a seller, will you need to become a buyer simultaneously? What does the market look like for the home that you are buying, location, price range, and amenities. Understand well the market that you will be facing. I remember selling a home about 35 years ago and the stress of not being able to find a suitable home after going under contract for the home sold. We finally had to rent while we built. It is important to work out your full plan before proceeding.
But that’s not the only concern. There is a big question about how long this Seller’s Market is going to last especially in light of the COVID-19 Crisis. What will the new normal be? What are the impacts of likely changes. Now before delving into this prognostication endeavor, let me be clear that I am not saying that this is definitely what is going to happen. I feel anyone who is certain about what the new normal will be or that space between now and then should not be relied on.
That said, I do believe we should consider what we know to be true thus far and to logically think forward as to what could happen following some likely outcomes. You may disagree with my logic and if you’ve considered these factors and feel that I am being overly pessimistic or perhaps optimistic that’s fine. I just want you to consider these possibilities before proceeding with your decision-making.
At this date, we’ve just received word that the national unemployment rate is 14.7%, which excludes some ineligible folks as well as those who have given up on looking for employment. This is up from a recent 50-year record low unemployment number of 3.7% less than 90 days ago. Conservative estimates are that the real unemployment rate falls some were between 20-25%. (Fortune on 5/7/2020: Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs).
What really matters of course in real estate is what is the local unemployment rate. Alabama’s March Unemployment rate was a low/healthy/favorable 3.5% and the Birmingham Unemployment rate for March a low of 3.0%. Typically Alabama has an unemployment rate of 7-10%, so we were definitely experiencing a boom. The question is what is likely to be the unemployment rate as we exit the COVID-19 Crisis.
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