Kathryn Lang is one Alabamian looking for a new home in the middle of a pandemic.
Her story sounds like 2020 in a nutshell. On April 12, when most of Alabama was still under a stay-at-home order, her family’s house outside Guntersville was totaled by a tornado. It wasn’t a new experience. The Langs sustained tornado damage during the infamous 2011 outbreak. But this year was definitely different.
“We were the only house that got destroyed by that storm,” she said, laughing at the odds.
But her story illustrates a larger one – the effect of the coronavirus on Alabama’s housing market has been by turns haphazard and multi-faceted, exacerbating an already tight inventory of available homes, yet opening up the market to buyers through low interest rates. At the same time, the instability of the economy looms large over what might happen in the second half of the year.
“My brother is a real estate agent,” Lang said. “He told us everything is coming off the market in less than 30 days.”
That’s the same thing Steph Brown, a real estate agent in Etowah County, is seeing. In the Gadsden area, there is less than three months’ supply of homes on the market, a figure that has gone down significantly just since June.
“It’s really aggressive,” Brown said. “Some houses are going on contract the day they’re listed.”
The U.S. housing market has proved resilient during the pandemic, and Alabama has been no exception.
According to the Alabama Association of Realtors, June home sales in the state increased 18.7% year-over-year, and 32.5% from May 2020. Those gains mean home sales are up 3.5% year-to-date.
David Lucas, president of the Birmingham Association of Realtors, said the pandemic’s affect on real estate was mainly felt right after the lockdown, but that quickly evaporated.
“When COVID hit, the March and April transactions were already booked,” he said. “Our concern tended to be after that. And it took a small drop, but our sales year-over-year here are up 15 percent. But then, inventory is down to a historic level, about 20 percent.”
At the same time, housing affordability in the state declined 5.3% quarter-over-quarter, as tight inventory and low interest rates make it a seller’s market.
Statewide median sales prices increased 9.8% quarter-over-quarter and 10.1% year-over-year. According to the Alabama Center for Real Estate (ACRE) at the University of Alabama’s Culverhouse School of Business, one of the more significant effects of the COVID-19 pandemic has been the reduction in properties listed for sale.
Inventory, which was already low coming into the pandemic, has tightened further as some sellers have decided to sit out the economic instability. June listings in Alabama fell 25% year-over-year. That makes 64 consecutive months of inventory declines, a trend that began back in February 2015, ACRE said.
Bill Stewart has been a realtor for 20 years in the Huntsville market, and was named 2020 Realtor of the Year by the Huntsville Area Association of Realtors. He said he’s seeing a lot of refinancing to take advantage of low interest rates and not a lot of inventory.
According to ACRE, homes spend an average of 22 days on the market around Huntsville. Sales there are up 6 percent year-over-year.
“We still have people moving into the area,” he said. “But what you don’t see is people leaving the area for other jobs as they did in the past. Whatever change is happening is in the area. That just adds to the shortage even more, because they’re seeking houses in the same market. So what you have is kind of a perfect storm.”
The pandemic is also affecting how homes are shown. Stewart said some home sellers express concern about safety with prospective buyers coming into their homes. Brown said where, in the past, a home might have asked that visitors take off their shoes to avoid staining the carpet, now some provide plastic covers for shoes. Others have a basket of masks, or gloves, for anyone entering.
“More people are taking precautions, especially if there are elderly people in the house,” Brown said.
Lucas said many of the changes are simply to reduce risk. Homesellers are being asked to leave cabinets or closet doors open, so buyers can get a look at space without having to touch the door knobs. Hand sanitizer is usually there for realtors as they come in, and any touching is most-likely done by them. At the same time, agencies are seeing increased numbers of virtual home tours through their Internet sites, which reduces risk further.
“The public has been very understanding with all of these changes,” Lucas said.
ACRE says Alabama’s housing market has matched or outperformed the nation on most housing metrics, including affordability. But the great unknown is how the pandemic will affect the other side of housing – mortgages. Earlier this month, President Trump signed an executive order extending a freeze on some evictions during the crisis, as the number of Americans who lost their jobs in due to the pandemic has affecting everything from rental properties to mortgages. Analysts say the second half of 2020 could see large numbers of evictions and foreclosures.
The number of borrowers delinquent on their mortgages nationwide fell by 340,000 in July, a 9 percent drop from June, according to data from Black Knight, a data and tech company. But serious delinquencies are now 1.8 million higher than pre-pandemic levels and are at their highest level since early 2010.
The good news for Alabama is that it is one of the top five states in the nation showing improvement over the last six months, with 35.45% of foreclosures and delinquencies among active loans improving over that period.
Lucas said one other affect may come in markets were school systems are conducting classes virtually. If children are at home during weekdays, that may mean homes will spend more days on the market as viewings would happen on weekends, when the seller’s family can arrange to be elsewhere as buyers visit. At the same time, those conditions may make bidding more competitive, since offers would likely come over the weekend.
Lang said she and her family found a short-term lease home in Marshall County in April and have been house hunting since. But there hasn’t been much that she likes.
“We’re different,” she said. “We like a lot of land and little house. We want an open concept with one family room, a deck, a porch. The designs are so weird right now. We may go toward building.”
Then she added, “And we want a storm shelter.”