November '21 Huntsville Real Estate Report & 2022 Real Estate Market Forecast

Hi, and welcome to our November Forecast. We’re gonna look back at the year 2021, and we’re gonna look ahead to 2022. What’s the market gonna do next year? If you’re buying or selling, these are things you need to know. We’re gonna have you updated here in just a second. Let’s go.

Well, welcome to November. This is our last forecast of the year. And included in our November Forecast, we’re gonna also look at 2022 to see what the market’s gonna hold for next year. Let’s take a look starting at our Market Action Index. We start here all the time because this is a short-term index telling us exactly what the market is doing in relation to inventory and sales. We’ve been looking now for months, we can see that it did peak back in April. It tapped out at 100, which is as high as it can go. And it’s been on a decline since then.

Inventory is the story. It has been the story all year and it will continue to be, as we go into the new year. We started out with almost 1,200 homes on the market in Madison County. We ended the year with about 683, but the story is where the inventory bottomed out, on July 23rd, a little over 400 homes. The early indicator here is that inventory is up 65% since July. So that’s what we want to see. We do want to see more homes coming on the market so that we can have more options for the buyers that are out there shopping. Properties with Price Decreases.

This is another early indicator. Back when our market was peaking in April and May, only 10% of the homes had decreases. So over 90% of the homes were selling at or above the list price. Now that’s doubled toward the end of the year, we’re over almost 22% price decreases. And that’s gonna increase as our inventory comes back on the market. Median prices have gone down a little bit. In July of 23rd, on our longer term average, we peaked out at about 389,000. We finished the year at about 370,000, but what an awesome year it was. Equity prices, home prices in the Madison County market were up over 26% this year. And we’re gonna finish out very strong, so we should be in that same range when we finish December.

So the big question we get is, is the market cooling with the temperatures? Well now, normally the market does cool with the temperatures. Fall and winter are gonna be slower than spring and summer, but so this could be a seasonal adjustment. It also could be as coming off of the highs back in the last spring and summer. Let’s take a look at the ShowingTime Index. This tracks all of the showings for all of the listed homes across the country. And you can see where our market was peaking in April and May, so were the number of showings at record highs. But all over the country and in Madison County as well, our showings have declined since then. And we have been on a downward trend since about May or June. But if you take a look at it historically, normal years, like ’17, ’18, and ’19, we’re still well ahead of those normal years in showings. So that indicates that we still have a whole lot more buyers in the market today than we did just two or three or four years ago.

Our Market Action Index is currently at 55. We’re right between a neutral market and a seller’s market. But we’re still in a pretty strong seller’s market, homes that are on the market in move-in condition, price right, still selling in a day or two with multiple offers. So for 2022, what is the market gonna do? So let’s take a look at some of the indicators and some projections for next year. If you’re buying or if you’re selling, these are things you’re gonna want to pay attention to.

First of all, it’s very difficult to predict future home sales, but I want to point this out, we’ve looked at this a few times. 2019 was a normal year, that’s the blue line. The gold line or orange line was the COVID year, 2020. This is when most of the countries shut down back in April and May. It didn’t happen here for us, but for most of the people, it did. And the green line is our current year, 2021. So we’re gonna finish out the year strong, with more sales than 2019, about the same as 2020. But the news is gonna get kind of negative because they’re gonna be comparing the end of this year to the end of last year, which was way over budget. And so we are gonna be down year-over-year in sales and prices from a year ago. But it’s nothing significant. It’s just gonna be the way the news portrays it.

Estimated Home Price Performance. Going forward, we’re gonna be well above this estimate that they had for ’21 in Madison County. But going forward, we expect prices to get more normal appreciation. And normally that’s the 3-4% range. So you shouldn’t expect another 25% year appreciation in your home prices. If you’re a buyer, if you’re gonna wait to buy for a year from now, prices are gonna be higher a year from now. If you’re a seller and you’re moving to another home, the home that you’re moving to is gonna be higher a year from now as well. Expected Home Value Change. If you’re gonna be in your home through 2025, if you’re an investor buying a rental property, if you’re a homeowner buying a new home, first-time home buyer, and you’re wondering if prices are too high, should you wait for them to decline? Prices are gonna continue to go up. They’re just not gonna continue to go up at the same pace we’ve seen over the last 12-18 months.

Mortgage rates are expected to increase. Now mortgage rates hit historic lows this year, lifetime generational lows below 3%. Currently, they’re teetering around 3, 3+%. Most economists, because of inflation, expect interest rates to increase for the balance of 2022 to somewhere up maybe in the neighborhood of 3.5% by the time the year is over. They’re pretty steadily now above 3% in most of our markets. And they expect those to continue to trip up for next year. Home sales forecast expected to increase next year. So we expect to have more sales next year than we did this year. This year was better than last year. So we’re headed in the right direction on sales. We just need more homes so that buyers have more options to choose from. “2022,” according to the Mortgage Bankers Association, “should be another strong year for the housing market.” And I don’t disagree.

So I just want to take a minute to talk about headlines. You know, headlines or clickbait, they’re meant to terrify, not clarify. Here is one example. I picked this example because it’s from Friendly Fire at realtor.com. The chart says that foreclosures are up 49%. The headline, “Foreclosures Are Shooting Up, Is It a Repeat of the Early 2000s Housing Crisis?” Well, think just a minute. Why do you think foreclosures are up 49%? And it’s because we had a moratorium on foreclosures during the COVID crisis. So there were hardly any foreclosures last year. So yes, they’re gonna be up now that the moratorium has been raised. And for the folks that haven’t been paying their mortgages, they are gonna have to move those folks out and they’re gonna have to get some new buyers in. But is it significant for the housing market? It’s not. As a percentage of our sales, distressed properties, which are foreclosures and short sales, represent less than 1% of the sales in our market today. So just think for a minute, anybody who’s owned a home for a year or more, they’re not in the bucket. They’re don’t have negative equity, they have positive equity. Why would anybody with positive equity go through a foreclosure? All they would need to do is put their home on the market, sell it, take their equity and move on to whatever they’re gonna do next. So foreclosures are not gonna be a significant damper on our market for next year.

Just a couple of quick things in the news. The news is always getting better for Huntsville and Madison County. We now have a blueprint, a plan for the location of the old Coca-Cola factory on Clinton Avenue, right across the street from the Von Braun Center. It’s gonna have residential, it’s gonna have restaurants, it’s gonna have offices and other commercial spaces. It’s gonna be awful nice. Downtown is really growing. If you hadn’t been to downtown Huntsville lately, you should go take a tour. It is really amazing. And also a second Amazon fulfillment center, 900 more jobs through Amazon. They like North Alabama. So we’re gonna have more production from the Amazon fulfillment center.

We have a lot of resources online. They’re all in the description below. Cash value offers for your home. You can sign up for our bi-weekly newsletter, buyer, seller guides. You can subscribe to our Market Action Index and you can check markets out anywhere in the country anytime you want to. It’s absolutely free. If you have any questions, put them in the comments below, and then we’ll certainly respond back to you.