Economic Snapshot Overview by Dr. Reid Cummings - May 2020

Posted on May 27, 2020 by Dr. Reid Cummings
Dr. Reid Cummings

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Greetings, and welcome to the May 2020 Mobile Bay Economic Snapshot.

Some recent data reports suggest that U.S. real estate markets nationally continue to fare far better than logic would suggest during the coronavirus pandemic. The S&P/Case-Shiller U.S. National Home Price Index reported that home prices in each of the nine U.S. census divisions rose 4.4% in March 2020 versus the same period a year earlier and were 4.2% higher than in February 2020. The 10-City Composite Index also indicates growth, finishing 3.4% higher in March 2020 than in March 2019; the 20-City Composite Index was 3.9% higher. The U.S. Federal Housing Finance Administration House Price Purchase Index rose 1.7% in 2020Q1 and was up 5.7% versus 2019Q1. The U.S. Census Bureau reports that April 2020 new home sales were higher than in March, rising 0.65%. Another positive activity indicator comes from the Mortgage Bankers Association, which reports that for the week ended May 22, 2020, purchase mortgage applications rose 9% from the previous week—the sixth consecutive weekly increase—and was 54% higher than early April’s reading.

While these data are all positive and encouraging, bear in mind they draw from national indexes. Closed sale transactional data tell a different story. The National Association of Realtors reports that in April 2020, existing home sales transactions were 17.8% lower year-over-year and inventory levels fell to a record low of 1.47 million homes. Interestingly, although single-family homes sales fell 16.9% for the month of April versus the previous month, condominium sales experienced a much sharper decline of 26.4%. It is too early to know if this points to a trend away from properties with common hallways and shared amenities or is just a pandemic-related anomaly. Still, it bears watching and property developers, builders, and lenders should incorporate future condominium sales reports into their decision-making processes.   

To help us examine area real estate market performance, Jana Stupavsky and her team created two new dashboards. The first reports new and existing home sales for Baldwin and Mobile Counties on a comparative basis for January-April 2020 versus the same period in 2019. In Baldwin County, 335 existing homes sold in April 2020, a -18.5% decline versus March 2020 and a -35.3% decline year-over-year. New home sales showed the greatest improvement, registering only a slight decline of -5.9% versus March 2020 but a strong 33.3% increase versus April 2019. In Mobile County, April existing home sales totaled 495 transactions, which was only -2.6% less than in March 2020, but -23.6% less than a year earlier. New home sales were flat from March to April 2020 but rose 5.7% year-over-year.

The second dashboard groups April 2020 home sales data into four price ranges. In Baldwin County, 53% of all homes sold were in the $150,000-$300,000 range; 23% were in the $300,000-$500,000 range; 14% sold for less than $150,000; and 10% sold for more than $500,000. In Mobile County, 51% of all homes sold for less than $150,000; 38% were in the $150,000-$300,000 range; 9% were in the $300,000-$500,000; and 2% sold for more than $500,000.

It seems that just like last month, April sales data are somewhat of a mixed bag. Nationally, leading indexes were up, but closed transactions were down. Regionally, new homes performed better than existing ones. Some price ranges showed more activity than others. Sales activity within price ranges differed in each county. Year-over-year, existing home sales fell less in Mobile County, but Baldwin County new home sales showed incredible strength. Even so, just as in March, real estate professionals in Baldwin and Mobile Counties report they are as busy as ever, and have quickly adjusted to the realities of listing, showing, and selling real estate in the midst of a pandemic. What is clear though is that nationally and regionally, inventory levels remain near record lows. Should these conditions persist, median prices will rise.

Last month we announced that given the continued uncertainty about the coronavirus, we decided to reschedule our annual conference. Currently under consideration is a virtual, half-day conference, featuring national speakers and offering three or more hours of CE, CLE, and CPE credits. Please stay tuned for a formal announcement soon.

Until next time, from everyone at the Center, we wish you and yours all the best.

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