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Q2 Report: Record Sales Create Less Than a Month’s Supply of Homes Under $500k

Executive Overview

Q2 Insight Focus
  • Sales level set a new second quarter record at 2,443
  • Q2 was the second highest for any quarter behind Q3 2020. first quarter record at 1,970
  • Median sales price rose to a quarterly level of $285,000
  • Sales doubled in the homes priced above $500,000
  • Days on market dropped to 9 days in May with a Q2 average of 12 days
  • Average number of homes listed for sale fell to a 20-year low of 464
  • There were 1,193 more homes sold in Q2 than were on the market at the end of March
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Home sales in 2Q (2,443) continued to grow from 1Q 2021 while prices climbed even. Pressure
on prices from strong demand and rising materials cost resulted in another record monthly median
sales price at $288,750 in March 2021. The pace of sales resulted in only 470 listed homes on June
30, 2021 compared to 926 in June 2020.

The price of homes continues to rise (green dashed line in Figure 1) faster than overall inflation
even with the significant jump in inflation. Median home prices (green columns in Figure 1) in the
2Q have risen year-over-year since 2018 and the rate of increase grew to 14.6% in 2021. The
inflation rate for all goods and services (red lines in Figure 1) has fluctuated during the same period
but jumped dramatically to an annual rate of 4.9% in 2Q.

Figure 1
Figure 2

In short, the quarterly number of homes sold in Madison County continues to be greater than the
number of homes available for sale at the end of the prior quarter. Sustaining this trend grows more
difficult since this gap drives prices higher and requires more homeowners to put their home on the
market.

With the growth in population driven by job growth, it may be unrealistic to assume that
there is an unlimited number of homeowners willing to sell while prices are rising. Constructing
new homes is critical to meet the demand for residential real estate in Madison County for the
forseeable future. Major changes in factors such as mortgage rates, construction materials cost,
availability of rental properties, etc., could quickly influence the momentum of the residential real
estate market even in a county with a growing workforce.

Market Snapshot

  • The Madison County residential real estate market continued to rise in volume and price.
  • The median sales price rose to $285,000 this quarter, an increase of more than 14.6% above 2Q 2020.
  • The number of homes sold priced above $250,000 rose significantly and homes above $500,000 doubled
  • Listings of homes fell in all price bands compared to Q2 2020 led by an 86% drop in homes priced
    between $200,00 – $250,000. (Table 1)
Table 1

Key Metrics

  • 2Q 2021 sales set another second quarterly record at 2,443 and was second only to 2020 3Q 2,621.
  • The first quarter median price rose 14.6% above 2Q 2020 and 11.6% above the 3-year 2Q average.
  • 1,444 buyers used conventional mortgage financing (above 1,129 in 1Q) and 430 buyers paid cash vs.
    350 in 1Q. (Table 2)
Table 2

Metrics Details

  • The months of supply fell below 1-month for homes priced below $500,000. (Table 3)
  • The workforce in Madison County continues to grow despite the pandemic interruption. (Table 3)
  • The increase in home prices (14.6%) outpaced the overall inflation rate of 4.9% between 2Q 2020 –
    2Q 2021. (Figure 4)
Table 3
Figure 3
Figure 4

Metrics Details

  • Total units sold reached 2,443, a twenty-year record level in 2Q 2021, and 216 above the 2Q 5-year
    average (2,227). (Figure 5)
  • The median sales price of the first quarter increased to $285,000, 14.6% above the 2Q 2020 of
    $248,680. (Figure 6)
  • The median sales prices for April, May, and June remained at levels above the 2020 levels. (Figure 7)
Figure 5
Figure 6
Figure 7

Metrics Details

  • Total 2Q unit sales were above the 2Q 2020 and 2019 levels for homes priced above $250,000 but
    were significantly under the number of units sold priced below $250,000. (Figure 8)
  • Homes sold priced above $250,000 doubled while homes priced above $800,000 rose 157% compared
    to 2Q 2020. (Figure 9)
  • The number of listings of available homes fell to a 20-year low at 470 in June by declining in all price ranges. (Figure 10)
  • The quarterly average number of listed homes has continuously fallen quarter-to-quarter since 2014. (Figure 11)
Figure 8
Figure 9
Figure 10
Figure 11

Metrics Details

  • Average quarterly Days on Market fell 60% to another record low of 12 days in 2Q 2021. (Figure 12)
  • The quarterly number of homes pending sale exceeded the number of homes listed at quarter-end. (Figure 13)
  • Months of supply of homes available continues to decline across all price ranges. (Figure 14)
  • The 16-quarter trend for sales and inventory levels suggests total sales could be approximately 2,400 in 3Q 2021 while the inventory of listed homes could decline to around 400 units. To sustain the trend, at least 1,200 new listings (2.8 times the 2Q ending inventory) will be needed in 3Q. (Figure 15)

Madison County Economic Indicators

  • The most recent estimate of Madison County population grew to 380,700 in 2020. (Figure 16)
  • Madison County workforce grew to 190,000 through May 2021. (Figure 16)
  • Median Household Income fell in 2020 to $63,520 mostly due to the economic slowdown caused by the pandemic response. (Figure 17)
  • The number of household units grew to 169,204 in 2020. This represents all types of housing units
    comprised of nuclear families, extended families, individuals living alone as well as unrelated
    roommates. Housing units should generally move in relation to population trends. (Figure 18)
  • Gross Domestic Product (a monetary measure of the market value of all the final goods and services produced in a specific time period) for Madison County rose 3.6% from 2018 to $23 billion in 2019, the most recent estimate available. (Figure 19)

Data Sources:
• Alabama Department of Labor
• Huntsville/Madison County Chamber of Commerce
www.hsvchamber.org/departments/economicdevelopment/economic-development-highlights/
• Huntsville Area Association of Realtors Monthly
Housing Statistics Reports
• U.S. Bureau of Economic Analysis
• U.S. Census Bureau
• Valley MLS System

Analysis & Report Prepared by:
• Jeff Thompson, Project Director
• Brinda Mahalingam, Ph.D., Economist
• Karen Yarbrough, Editor

Questions regarding this report may be directed to Jeff Thompson, jeff.thompson@uah.edu, 256.361.9061