2021 was a wild ride in real estate across the country, and Birmingham’s housing market was no exception. To get a picture of what happened, we reviewed the real estate stories we wrote throughout the year and reached out to the experts at Greater Alabama MLS + ACRE. Here’s what we learned.
Predictions for Birmingham’s housing market at the beginning of 2021 vs. what actually happened
Prediction: The experts at Ray & Poynor told us back in January that 2021 was looking like it would be a strong year for sellers due to low interest rates, low inventory, lots of competition and people with kids in virtual school feeling ready for a change.
What really happened: It was a strong year for sellers—here’s what happened in Jefferson County alone, according to the Greater Alabama MLS:
- 11,477 homes sold for a total of $3,419,754,419
- Up from 10,856 for $2,978,644,837 in 2020
- Interest rates: The National Association of Realtors expected interest rates to stay in the 3.1% range. As of December 21, 2021, the average interest rate on a 30-year fixed rate mortgage had risen *ever so slightly* to 3.25%.
- Inventory numbers: In the first quarter of 2021, sellers saw multiple requests for showings the moment their homes were listed, due to low inventory. By November, home inventory in Jefferson, Shelby, St. Clair and Blount Counties was down to 2,533 listings compared to 3,150 in April, according to Stuart Norton of ACRE—Alabama Center for Real Estate.
- Prices: According to ACRE, 2021 prices in the Birmingham area increased 13.9% over 2020, matching price increases nationwide.
Prediction: Buyers—including a strong showing by WFH millennials—would need to enter their search pre-approved for a loan and prepared to sell their current home on a dime. Few or no contingencies would become the order of the day.
What really happened: Realtors coached millennial buyers + others in how to navigate the crazy sellers’ market, including tips like building up your savings before jumping in. As prices increased 13.9%, it became more important than ever for both sellers and buyers to be prepared so they could move—literally—quickly.
Prediction: Home offices, more space, larger homes and second homes would all be important factors in buyers’ decisions.
What really happened: These factors stayed important and other trends, such as outdoor living spaces, shifted from would-be-nice to must-have.
Summer 2021 was hot, as was the sellers market, but no bubble in Birmingham’s housing market
By June 2021, we were wondering (along with the rest of the country) if the hot housing market was really a a housing market bubble, and if so, when the bubble would burst.
Most Realtors’ advice, at that time, was to “keep calm and carry on.”
Here’s what we concluded: “Instead of a wildly speculative market that’s bound to come crashing down, we’re actually in a very strong market that over time will adjust, but we’re not necessarily doomed to a big crash like we experienced in 2007-08. 🤞🏽”
The experts we spoke with broke it down farther by identifying three drivers of demand:
- the pandemic
- low interest rates
- millennial homebuyers
Same song, different verse from what we heard at the beginning of the year.
Realtors also identified two key drivers of low supply:
- people staying put rather than selling
- construction slowdowns (who knew labor shortages + supply chain issues would become such defining features of 2021)
As summer—and house prices—heated up, we asked Richard Grimes of RealtySouth and Jim Bryant of Prosperity Home Mortgage just how long they thought the competitive sellers market would last.
In addition to the demand drivers mentioned above, they cited low supply and more cash on hand due to stimulus payments and more time at home.
While they couldn’t predict how long the sellers market would last, the only thing they could foresee that would slow it down would be rising interest rates.
Fall + winter were much the same, though inventory + interest rates did start to rise… a little
By late spring, we had started to hear talk of inflation, and that continued throughout the rest of the year.
The biggest change, looking ahead to 2022, is that because of the rising cost of renovations and labor, buyers are looking for turnkey homes.
As of December 21, interest rates had risen to 3.25%, but the market still isn’t showing signs of slowing down.
Stuart Norton of ACRE gets the final word:
“Home price growth in the Birmingham area (Jefferson, Shelby, Blount, St. Clair counties) accelerated during the second half of the year, with the area’s median sales price rising 13.9% year over year in November compared to 6.1% year over year in April 2021.
Price gains have largely been driven by elevated demand amid tight inventory, which has trended down in recent months. National and statewide inventory, however, has increased slightly from the lows seen in the spring months of 2021.
This shift has brought price growth in the Birmingham area to near the rate seen at the state and national level, 13 to 14% from one year ago. Home price growth is expected to moderate to 7 to 9% year over year in 2022, with consumer demand cooling off slightly from rising mortgage rates and affordability concerns.”
Now tell us, Birmingham, what do you think of the 2021 housing market? Tag us on social @bhamnow and let us know.
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