Alabama’s housing market, along with the rest of the nation’s, faced challenges in 2024. Home sales across Alabama dropped 18% compared to 2023, the lowest number of transactions the state has seen in recent years, and total sales volume followed suit, declining 19%year-over-year.

The main culprit? Mortgage rates that remained persistently high, keeping many homeowners in place — especially when more than half of them currently have a mortgage rate of less than 4%.

“High interest rates have certainly been a major factor in depressing home sales,” said Dr. David Hughes, an economist with the Alabama Association of REALTORS®. “Homeowners who secured low mortgage rates in previous years have been reluctant to sell, which has dampened supply and kept prices elevated, further limiting buyer activity.”

Despite the slowdown, an interesting dynamic began to emerge: residential listings increased. In fact, Alabama saw a 6.4% rise in new listings compared to 2023 — the highest volume of active listings since 2019​.

On the surface, this might seem counterintuitive. If homeowners were reluctant to sell, what was driving the increase? 

“I would interpret the increased number of listings as due to weaker demand,” Hughes said. “We've seen that homes sold have spent more and more time on the market before closing, and as properties spend more time awaiting a purchaser, the total number of listings increases.”

Even in a tough market, certain trends stood out as encouraging signs for the future.

New construction, for example, has begun to make a comeback. With fewer existing homes changing hands, builders have ramped up activity, leading to a 10% increase in new home building permits​ in 2024. This surge in construction could play a significant role in improving affordability — particularly for first-time buyers who have struggled to compete in the resale market.

"While it’s hard to know what effect increased building permits will have on the overall housing market, one would anticipate that increased construction should help make homes more affordable," Hughes said. "Particularly for first-time buyers, which should itself contribute to greater sales.”

Another factor supporting Alabama’s market was steady in-migration. The state gained 40,000 new residents in 2024, driven largely by domestic migration. This influx of new buyers has helped sustain demand even in the face of high borrowing costs.

The winter months are historically slower for home sales, and the real test for Alabama’s housing market will come this spring and summer. Economists will be watching closely to see if home sales begin to see if a rebound occurs as seasonal trends kick in.

“I think we're at a ‘wait-and-see’ stage as prices typically hit their lowest point during the winter before enjoying a spring and summer boost,” Hughes said. “I have my eye on the spring market to see if total sales begin to rebound, along with sales prices.” 

The other major wildcard is mortgage rates. Hughes, along with other economists, anticipates that elevated interest rates are here to stay — for now — and that as time goes on, they’ll become the norm for consumers, hopefully spurring more balanced activity.

Despite a difficult 2024, Alabama’s housing market is showing signs of shifting dynamics. While home sales dropped significantly, rising inventory, increased construction and strong migration trends suggest that the market is not in a freefall — rather, it’s adjusting to a new reality of higher borrowing costs and evolving buyer behaviors.