Home supply’s down, demand’s up, interest rates are rising—4 experts on what to expect now

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Birmingham housing market experts
Kevin Bader, Dan Flemming + Richard Grimes. (Jacob Blankenship / Bham Now)

Like you, we’ve been watching the housing market’s wild ride for some time now. To make sense of it, we reached out to four local experts: Richard Grimes and Dan Flemming of RealtySouth, Kevin Bader with Prosperity Home Mortgage and Stuart Norton from Alabama Center for Real Estate (ACRE). Here’s what we learned.

Meet the experts on Birmingham housing market

Birmingham housing market experts
Discussing the state of the housing market at RealtySouth’s Blue Lake headquarters. (Jacob Blankenship / Bham Now)
  • Richard Grimes is CEO and President of RealtySouth.
  • Dan Flemming is the Broker in RealtySouth’s Alford Avenue office. 
  • Kevin Bader is a Mortgage Consultant with Prosperity Home Mortgage, LLC. 
  • Stuart Norton is Associate Director of Alabama Center for Real Estate (ACRE) at The University of Alabama. 
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Bham Now: Tell us what you’re seeing in the Birmingham housing market now.

interest rates
After a long downward slide, interest rates are inching back up. (Freddie Mac)

Dan Flemming: “Everybody’s thinking about interest rates and how that will impact the housing market this year.”

Kevin Bader: “Interest rates have climbed 2.375% since last May, according to Freddie Mac. This means that buyers who have been in the market for some time trying to find a home now are facing the realization that they have to look for homes in a price range that is 30% lower.” 

Richard Grimes: “We’re seeing a surge in buyers trying to outpace interest rates, because their buying power will shrink over the next few months. There’s a huge difference in buying power at 3%, 5% and 6%.” 

Norton: Note: Stuart Norton is a researcher at Alabama Center for Real Estate (ACRE), so he has a lot of market data at his fingertips, comparing March 2021-March 2022. We’ve condensed his answers below.

  • “Median sales price grew 12.7% year-over-year (Y/Y) in March. 
  • Price growth has stabilized to the 10-14% range since October 2021 and should moderate to the upper single digits (7-9% by year-end) as sales activity slows somewhat due to rising mortgage rates. 
  • Inventory: is still tight, at 39% below levels seen one year ago. That said, it’s up significantly from February, rising 21.3% month-over-month. 
  • Supply: is still tight with 1.2 months of supply, but this should slowly trend up, possibly reaching two by the end of the year. We are still very far from equilibrium (6 months) and the seller’s market will continue for the time being.
  • New home supply: is also tight, with one month of supply in March. With ongoing labor and supply chain issues, builders are doing their best to keep pace with demand.”

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Bham Now: What do you predict for the rest of the year in Birmingham housing market? 

sales vs. inventory
Bham Metro residential sales vs. inventory. (ACRE)

Grimes: “There’s no mechanism in our market to create 1000 more homes. So supply is still going to be short, although demand will temper as we go through the year a little bit, because of rising interest rates and normal seasonality.” 

Flemming: “I believe over the course of the next year, we’ll see a return to more of a buyer’s market than a seller’s market. And probably a decrease in home prices instead of the rapid escalation we’ve been seeing.”

Norton: 

  • “Rising rates will cool off the market somewhat, relieving some of the upwards pressure on prices caused by bidding wars.
  • Home sales: are likely to slow by 10% or so from last year’s pace. 
  • Inventory: is still very low, so home sales prices are likely to continue rising, but at slower rates of growth. Prices: the nationwide median sales price gained 15% year-over-year in March, I expect this to moderate to the 6-8% range by the end of the year.

The market has been in high gear for almost two years now. A slowdown will allow home price growth to readjust towards more sustainable rates, while also encouraging a gradual increase in supply.”  

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Bham Now: What options do sellers have if their home sells fast and they don’t have a new place to live?

Median sales price growth
Median sales price grew 12.7% year-over-year (Y/Y) in March. (ACRE)

Home sales are closing so quickly, sellers don’t always have a home lined up to buy. In that case, what would their options be?

Grimes: “You need to turn yourself into a cash buyer that’s prepared to move quickly. Work with a buyer’s agent that’s a Realtor and work with your lender to be pre-underwritten at a certain dollar amount. That way there’s no financing contingency, even with a mortgage.” 

Flemming: “We’ve recommended people check out a couple of communities here in Birmingham that have short-term rentals, including The Heights, just off Grants Mill Road, until they find the house that they desire.” 

Bader: “Rent is rising like everything else. No matter where interest rates go, you have to ask yourself “Would I prefer to pay just over 5%, 6%, or higher to own a home that I am paying to build equity in and getting a tax benefit from. OR does it make more sense to rent, where, by making my rent payment, I am guaranteed a 100% interest rate with no benefit, no equity and no interest write-off?”

Wondering what your home is worth in the Birmingham housing market? Check out RealtySouth’s Home Value Estimator today.

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