Montgomery Home Prices Rise Despite Inventory Backlog

The number of homes on the tri-county market of Alabama has gone up more than 30 percent, but so far, the home prices aren’t going down.

According to the Montgomery Advertiser, the Montgomery area, which includes Montgomery, Elmore, Autauga and Lowndes counties, has 669 more homes for sale than it did a year ago and the homes are taking longer to sell.

But home prices actually rose slightly during the past year, making it more expensive to qualify for an Alabama home loan, according to the Multiple Listing Service, a database of homes for sale by area brokerages.

Despite more homes on the market, there were slightly less sales than the same period last year. MLS data shows 1,289 homes sold during the first three months of this year, down from 1,295 during the same period of ‘06.

But the average price this year was $169,905 compared with last year’s $161,423 - a difference of about $8,500 for the Alabama mortgage seeker.

The number of homes for sale in this market has gone up more than 30 percent, from 2,203 a year earlier to 2,872 as of Tuesday.

Despite the increase in price, Ed Martin, general manager of Aronov Home Realty, said this still makes it a buyer’s market.

“With less demand, sellers will be inclined to accept lower offers, thereby causing average prices to decline,” Martin said. “In 2005 buyers had to pay almost the full asking price because homes were selling so quickly, causing sellers to ask more and be more resistant to lower offers.”

So why, in a buyer’s market, are home prices going up?

Realtors say the answer is that more higher-end homes are being built, so while buyers may be getting better deals, they are getting them on higher-priced homes. The Birmingham housing market is seeing similar trends.

Brad Owen, Executive V.P. of the Montgomery Area Association of Realtors, said the shift to a buyers market is not as jarring in Montgomery as in other parts of the country.

He cited a solid economy on the heels of back-to-back sizzling house sales in 2005 and 2006 as factors protecting the Montgomery housing market.

“In ‘05 and ‘06 we had the best two years ever,” he said. “There was nowhere to go but to slow down. Coming down has been soft, but it is slowing down a little bit.”

That little bit of slowing means houses are staying on the market 84 days the first quarter of this year, compared to 77 days the first quarter of 2006.

Owen said Alabama mortgage bargain-hunters are also playing a role in keeping the houses on the market.

“They are biding their time to see if they can get a better deal,” he said.

Owen said booming construction is adding homes to the inventory, but he said that construction follows market demand.

Homes of about 2,000 square feet are hot in the market now, with larger homes spending more time in sales inventory.

So far the area housing market is bucking national trends as far as both home sales and prices.

National home sales for February, the latest month’s data available, showed a 1.3 percent decrease in prices over the past year and a 3.6 percent decrease in the number of homes sold.

“No matter what the national news reports, Montgomery is not the Gulf Coast, we are not Florida or California,” Martin said.

“Right now, because of our stable growing economy, we have a more active, better situated real estate market for both buyers and sellers than most other places in the country.”

Martin said he is at least a little confused by Montgomery’s slow market right now.

“The reason for this, in this market, is not clear to me because home mortgage rates are still quite low and our local economic picture is quite rosy,” he said when asked what is causing the slow sales of homes.

Martin predicted area job growth, sparked by the automotive sector, would make rental houses a hot property, leading to home buying by investors.

He said his company manages almost 500 rental homes. Many of these are for professional investors from across the country “who recognize the potential values here,” he said.

Owen said demographic predictions show Montgomery, like much of the Alabama housing market, can expect a population increase.

“If the population is going up, you have got to have housing,” he said.

SOURCE: Montgomery Advertiser