Alabama's Gulf Coast contains several real estate markets depending on location and price point – just to name a few factors. What may be true of the market in Daphne at one price point is often not for Fairhope at another. Same goes from one Mobile neighborhood to another. What makes our current real estate housing market rare is that almost all markets in our area have something in common: an increase in demand and limited supply. 

The combination of delayed sales due to COVID-19 last year and historically low interest rates culminated into a historically strong seller's market for our area in 2020 that has continued well into this year. As more people want to purchase homes than there are homes available for sale in many price points and areas along the Gulf Coast, we've seen a corresponding rise in home prices. 

In Baldwin County, the average sales price has risen by more than $86,000 from July 2019 to July 2021. Same is true in Mobile County. The average sales price has risen by more than $70,000 from July 2019 to July 2021, according to stats from the Alabama Center for Real Estate (ACRE). Data for Baldwin County showed only 1.4 months of available inventory on the market based on the number of homes that sold in July 2021 versus 4.4 months of inventory in July 2019, and Mobile estimated only 1.2 months of available inventory in July 2021 compared to 2.9 in July 2019.

That estimate, known as the absorption rate, is calculated by dividing the number of homes sold in a month (or any period of time) by the total number of homes that were available for sale. It's one of the ways real estate professionals gauge how quickly a home is likely to sell, and as you can see, the answer right now is very quickly. 

The rapid increase in home prices has some buyers understandably questioning whether now is the right time to purchase a home. The answer is still yes for many buyers. This current market has benefits for both buyers and sellers. 

While home prices have indeed risen – benefitting sellers – we are still experiencing historically low interest rates, which is a boon for buyers. Freddie Mac reports the average rate for a 30-year fixed-rate mortgage in July 2021 was 2.87%, one of the lowest rates in 50 years. This means if someone purchased a home in July 2019 for $300,000 (assuming a 20 percent down payment and 30-year 3.77% fixed-rate mortgage - the average interest rate at the time), today they could purchase a $335,000 home for the same principal and interest payment, assuming the same down payment and loan terms. Buyers can now afford more home for their money.

It's easy to forget that the interest rates we are experiencing now were unheard of in the mid-2000s. ACRE data dating to 2006 shows that home buyers were paying a higher monthly payment for a home in Baldwin County from 2006-2008 — and even 2018 — than they are paying now, when adjusted for inflation. For example, the average home cost in Baldwin County in 2007 was $278,711, and the average mortgage interest rate for that year was 6.34%. With a 20 percent down payment, the monthly principal and interest payment would have been $1,386, which today equates to $1,817 when adjusted for inflation. That's $523 more than what someone would pay for a home at today's average price for Baldwin County of $387,221 at the year's average mortgage rate of 2.93 percent. 

The same is true for Mobile. AREC data dating to 2006 shows that people were paying a higher monthly payment for a home in Mobile County from 2006-2009 than they are today when adjusted for inflation. Today, assuming 20 percent down at 2.93 percent mortgage interest rate, the $226,225 average home price for Mobile would cost $756 per month (principal and interest only). The $158,500 average home price in 2007 at the then-average 6.34 percent mortgage interest rate would have been $1,033 per month in today's dollars. Check out the graph above for more cost comparisons when adjusted for inflation.  

Of course, everyone's situation is different, but this news should bring comfort to both buyers and sellers, especially those who will be buying another home after selling. There is still reason to believe making a move could make good financial sense for you. You need the guidance of an experienced REALTOR® to help you determine the best course of action. Reach out to me if you have any questions about taking advantage of this remarkable market.