As anybody looking for a new home in the last two years can attest, housing values have risen sharply across Alabama. This has been a national trend. In order to get inflation under control and to slow down the housing market, the Federal Reserve has imposed the first interest rate increases since 2018 and indicated this will be part of a series of interest rate hikes. But has this been effective in curbing the housing demand here in Alabama?
Laura Payne is a realtor with Arc Realty in the greater Birmingham area.
Payne told 1819 News that the recent hike in interest rates has not slowed the housing market in her area.
“A home will be on the market for a day or two, and there will be offers on it,” Payne said. “If a home is the right style and all updated with all the right colors and everything, it is going to get several offers, and all of them will be over the asking price.”
Payne said that home buyers have noticed how the interest rate hikes have increased their monthly mortgage payments.
“I just had a closing on a home in Ashville, and the buyers were surprised to see how their payment was affected by the rates,” Payne said.
Payne thought that housing values were going to continue to climb in the greater Birmingham and St. Clair County markets where she is active.
“I have seen a report that hedge funds are going to become a major purchaser of residential homes,” Payne said. “That is going to be a game-changer. Prices are not going down.”
Payne said that most home buyers in the area are prepared for this robust market.
“These buyers have saved up money so they can put a down payment and can pay $5,000 at closing if the home does not appraise at the amount of the offer,” Payne said. “There are a lot of cash buyers in the Birmingham market.”
Chey Garrigan is a real estate broker with Great Southern Realty in Gulf Shores. Garrigan told 1819 News that the recent interest rate hikes have not affected her area of southern Baldwin County on the Alabama Gulf Coast. Garrigan said he has seen a lot of investors who pay cash.
“Baldwin County is a great place to live, work and raise a family, and it also attracts a lot of retirees,” Garrigan said. “People dream all of their lives about living here near enough to the beach that they can enjoy the Gulf Coast lifestyle every day.
“People are moving here for work, and they are moving here for the quality of life. We also have a robust vacation rental market where people rent out homes.”
1819 News asked Garrigan if she was confident that housing in the Gulf Shores, Orange Beach, Foley, Fairhope and Daphne areas were still sound investments given the rising interest rates.
“If I received listings tomorrow on a dozen homes that were attractive and up to date in this area, I would have offers on them within days, and they could be sold within two weeks,” Garrigan said.
1819 News also spoke with John Edwards, a realtor with EXIT Realty in Shelby County in the Greater Birmingham area.
“Higher interest rates aren’t scaring anybody,” Edwards said. “We don’t have enough homes.”
Edwards said that he recently had a buyer who wanted to see a new listing in the Oliver’s Crossing community in Leeds.
“The first Saturday [after the home came on the market] was booked solid,” Edwards said. His buyer was one of 40 who were scheduled to tour the home that day.
Edwards said that buyers understand the home is going to cost more than the asking price.
“One realtor told me that he hasn’t sold a home for the asking price in 18 months,” Edwards told 1819 News.
Earlier that day, Edwards had a buyer who offered $20,000 above the asking price fail to get the home that they wanted.
“A seller is going to have his choice of offers,” Edwards said. “I like to have the home pass inspection, to get the termite bond in place, but buyers don’t give a damn. They just want to get the house, and sellers don’t want to accept offers with strings or contingencies. It’s crazy.”
Edwards said that the high real estate valuations in other states are helping drive the market in Alabama up.
“My best clients are from Texas or [California],” Edwards said. “I get calls from California and Texas all the time. They see Alabama football and the beach and the home prices are cheap to them. This is like heaven to them.
“My son recently moved back from San Francisco and sold his house for a million [dollars]. It was a little bungalow house that would shave been like $150,000 in Leeds.”
Edwards said that in February and March, his buyers were getting interest rate percentages of 2-3%. They are going to be 5-6% in May.
“Most of my buyers are not looking to move up,” Edwards said. “They have to have a home. They have a new job, or they had a divorce, or they have a new baby.
“These are regular working people. They have to have a place to live."
Edwards said buyers don’t seem to care about interest rates because they need housing.
Garrigan shared national data from the National Association of Realtors showing that sales of existing homes nationwide were down 2.7% between February and March. Sales have decreased from the record highs in 2021 by 4.5%, and home showings dropped by 19% from the same time last year. The group's most recent data shows that pending home sales slipped by 4.1%.
Dr. Lawrence Yun is the chief economist for the National Association of Realtors.
“After two years of super-heated market conditions, home sales are retreating back to pre-COVID days,” Dr. Yun told the Washington Examiner.
High fuel prices, the highest inflation seen since 1981, supply chain issues and soaring food prices. This is combined now with rising interest rates that are increasing home loan payments on new housing purchases and all this is causing many Americans to feel that they are pinched even while jobs are plentiful, and they are making more money than ever before.
To connect with the author of this story, or to comment, email brandon.moseley@1819News.com.
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