Much like the temperatures this fall season, Alabama’s hot seller’s market has experienced a cool down. 

September saw an 8% drop in home sales compared to last year and a nearly 11% decline month-over-month. This slowdown in sales volume, alongside a 4% increase in active listings, suggests a market shift toward greater buyer opportunity.

“Buyers should find a greater variety of homes available in the state and, if history is any guide, fewer competing buyers for a given property,” said Dr. Evan Moore, an economist at the Alabama Association of REALTORS® (AAR). “There is usually a declining number of home sales in each month through the last quarter of the year, and this tends to continue through the start of the following year. Additionally, home sales prices tend to be lower in the winter months.”

This development offers relief for buyers who, over the last few years, may have felt the frustration of trying to purchase a home. September marked the eighth consecutive month of rising inventory — the highest in five years — giving prospective homeowners more options and easing the pressure to meet seller demands or engage in bidding wars.

“With greater inventory, buyers will be able to be a bit more selective, thereby driving prices down,” said Dr. David Hughes, another AAR economist. “This would especially be the case if interest rates continue to fall, since buyers who finance their purchases would be able to obtain lower mortgage rates, opening up additional properties that might not have been affordable to them until very recently.”

However, some uncertainties remain, particularly regarding interest rates.

The average 30-year fixed-rate mortgage declined through September, but then jumped back up during October, with the three-week span from September 26 to October 17 marking the fastest uptick since fall 2023. 

Further, 80% of mortgage-holding Alabamians have a rate that is less than 6%. Given current rates are above that threshold, many might not be interested in getting into the market, predicts Moore. 

“Mortgage rates above 6% will likely continue to damper sales activity, as higher rates hinder affordability,” he said.

Another factor that the market still has balancing to do is monthly inventory. According to the National Association of REALTORS®, ideal monthly inventory — the number of months it would take for the current inventory of homes to sell given the current sales pace — is around six. As of September, Alabama’s inventory was at 4.6 months — a 40% increase over August, and a move in the right direction — but not quite where experts prefer it.

Moore and Hughes agree that while September’s activity slowed, the future of the market still remains uncertain.

“My biggest takeaway is that there remains a degree of uncertainty in the Alabama residential real estate market,” Hughes said. “While it is true that interest rates have cooled recently, they are still higher than what many consumers are accustomed to. Inflation worries, along with voters anticipating the outcome of the 2024 presidential election, will lead many to stay put as they await economic and political conditions that provide greater certainty.”