Real Estate Fortune Telling

By on 11 January, 2012 in Real Estate, Sandra Nickel with 3 Comments

Photo by D. Begley

Midtown Montgomery Real Estate:  Where We’re Going and Where We’ve Been

Midtown Montgomery produced 325 home sales in 2011. To put that in perspective, our peak year of recent memory was 2004 with 781 homes sold. Clearly, 2011 was a tough year for Midtown.

The entire Montgomery area didn’t fare much better. 2011’s dismal 3,255 homes sold statistic stands in stark comparison with the area’s peak of 6,175 home sales in 2005.

Interestingly, the last time we saw two really sluggish real estate years like 2010-11 was 2000-2001. Suppose the-front-ends-of-decades have a special deleterious effect on home sales? That just might be fodder for another post.

So … is there light at the end of the real estate tunnel? And, if so, is it a train hurtling toward us or is it hope for a brighter future? Of course, only time will tell for sure. Here are my thoughts based on some recent happenings, news reports, etc:

Employment. The Montgomery Advertiser trumpeted last week,  ”Economy Adds 200,000 Jobs,” and went on to report that national unemployment had dipped to 8.5%, seasonally adjusted. While these numbers are certainly less than wonderful, they are a good bit better than had been anticipated. Some of the smart money had bet 150,000 new jobs and an uptick in the number of job seekers.

Locally, just before year’s end, Mayor Todd Strange revealed that three existing employers (PHA Body Systems, Hartzell Engine Technologies and Rheem Mfg) had added a total of 71 new jobs to their respective work forces. New jobs that come with new businesses are great, and when an existing business adds to its workforce that indicates an improvement in demand for their goods and services right here at home.

More jobs mean more folks with income who can begin to contemplate home ownership. As Martha Stewart would say, “That’s a good thing!”

Interest Rates. As I write, a plain vanilla 30-year fixed rate mortgage can be obtained at between 3.75% and 4%. Short of giving the money away, I just don’t know how lenders can make borrowing to buy a home much more attractive. And short of another horrible financial debacle, I really don’t envision rates declining further. In fact, I’m betting they will sooner or later head in the opposite direction.

My friend and Montgomery’s wisest mortgage banker, John Herzog of Cadence Bank, has often observed that it’s hardest to close loans and make home sales in a period of stable interest rates. Somehow, prospective first time buyers and mover-uppers get lulled into a “there’s always tomorrow” state of mind. If, as I predict, rates start back up that illusion will be shattered and many a fence-sitter will quickly get serious.

Cost of Renting. Job losses and credit woes have dramatically increased the number of singles and families who are renting instead of buying. And you don’t have to be very smart about economics to know that as demand for something increases and the supply of that thing remains relatively static (as have the number of desirable rental units available in Montgomery), the inevitable happens: Prices go up.

Rents in high-demand areas of Montgomery have gone up enough that it’s now actually cheaper to own your home than to rent the same size and quality space. That’s not going to go on forever. Tenants are not stupid and they are beginning to “get it” and start thinking about home ownership once again.

Homes Available for Sale. When Father Time closed the curtain on 2011, 7,049 homes had been put on the market here during the preceding 12 months. That number is exactly 1,000 fewer than were offered for sale during 2010. Inventories (the number of homes for sale) continue to decline. Once again, supply and demand kicks in: Fewer homes for sale should bring about some increase in sales prices/home values.

For all the above reasons and others, I believe we in Midtown Montgomery are headed for better real estate times. And it won’t happen overnight. A magic phrase in real estate is “the balanced market.” For residential, that means there are exactly six times as many homes for sale as will sell in a six month period, what we call a six months’ supply of homes.

In Midtown today there are 277 homes for sale. Based on the above, data, we should have no more than 162 available. Which means that just like in the past two to three years, we’re still in a strong buyers’ market. My friend and top-producing REALTOR Brenda Rawls calls our situation “a price war and a beauty contest.” Keep that in mind if you’re thinking about selling this year.

Sandra Nickel has been listing and selling residential real estate for over 29 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.

 

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There Are 3 Brilliant Comments

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  1. Buffy says:

    Any reason there have been so many homes for sell on Felder Avenue this year? That’s my street, and we seem to have a lot of listings.

  2. Buffy, that’s a great question. Some of the listings are because folks are downsizing. That’s a big factor with the really big houses.
    The second reason is transfers. I am personally aware of at least two listings that came on the market because their owners were leaving town.
    A third factor is folks who are moving up.
    And the last thing is “miscellaneous.”
    Nothing sinister at all going on. And I do understand that the presence of many for sale signs on a single street can create a negative illusion.

  3. Buffy says:

    Thanks! I love Felder. I’m not planning to sell for a long time, and feel my little cottage house in the midst of the big painted ladies is a great investment.

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