Home Construction Outpaces Home Sales….

Real estate news and notes from the week:

Monday’s report on home sales was good news to local Realtors, who saw a 26 percent jump in home sales between April and May. One month does not a trend make, but any uptick is good news in a national market that continues to languish.

One real estate expert agrees the Huntsville market is faring better than others, but he also offers a cautionary note.

Tom Brander, a principal in Birmingham-based Rudulph/Brander Real Estate Statistical Reports (tombrander.com), collects data from multiple-listing services throughout Alabama, including the Huntsville-area MLS, which includes eight counties in North Alabama and a small part of southern central Tennessee. Rudulph/Brander supplies market data to the banking and building industries.

Brander says he’s surprised by the level of new home construction going on in the market, particularly in Madison County, when inventory levels remain high. According to the Huntsville Area Association of Realtors, 111 new homes were sold in Madison County last month; builders pulled permits for 187 new homes (reported by the Huntsville/Madison County Builders Association), making the construction rate for new homes about 1.7 times that of the sales rate.

Brander’s numbers differ slightly: He reports 82 new homes sold in Madison County, making the construction rate about 2.3 times the sales rate.

Here’s where both the local Realtor’s association and Brander agree: The bulk of current sales are for lower-priced, used homes. Indeed, in Madison County alone, more than 85 percent of the homes sold in May were under $300,000, as more first-time buyers take advantage of the tax credit to buy homes in their price range. Higher-priced homes typically are purchased by homeowners who are “moving up” into a larger, more expensive home and have equity in their first home.

“By any measure you’ve got, once you slice out anything under $200,000, you’re well over two year’s worth of inventory based on historical sales, which (the market) is now under,” Brander said. “The used market is killing the new market. New homes are being built much more quickly than they are being sold.”

He notes that current sales levels in the Huntsville market are running under 2004 sales levels, and more than 7,000 homes sit for sale throughout the eight-county region.

“If 100 percent of the BRAC jobs move here, and all of the additional jobs expected, it still won’t absorb all the homes for sale,” he said. He also noted that defense budget cuts reported recently could lead to hundreds of jobs lost in North Alabama. Oscar Gonzales, executive director of the local Realtors association, said he disagrees.

“There’s typically a 12- to 18-month lead time for new construction,” he said. “With what we’re hearing from the chamber (of commerce) and in informal conversations, I’m confident that the new construction will be absorbed. You have to have things in the pipeline.”