Economic Snapshot Overview by Dr. Reid Cummings - July 2019
Posted on July 26, 2019 by Dr. Reid Cummings
Greetings, and welcome to the July 2019 Mobile Bay Economic Snapshot.
This month, we highlight real estate market performance through the second quarter of the year.
Baldwin County, Q1-Q2, 2019
The year-over-year number of existing single-family home sales transactions registered an impressive 21.9% gain, for a six-month total of 2,760. Although total sales volume rose only slightly, finishing up 0.9% at $860.9 million, the average sales price was up sharply, finishing at $302,000, a surge of 28.2%. The median sales price fell by (9.3%) to $223,000.
A total of 687 new single-family homes sold in the first two quarters of 2019, a 12.0% increase over the same 2018 timeframe. Total sales volume was only slightly less, down (1.20%), finishing at $183 million. Average new home sales prices were 1.8% higher at $267,200, although the median sales price was (8.3%) lower at $240,000.
Condominium sales dipped by (1.8%) versus the same period in 2018, totaling 1,290 units. The total sales value of $470.1 million reflects an increase of 6.6% year-over-year. The average sales price also rose by 7.3% to $359,600, while the median sales price experienced a strong, double-digit increase, rising 21.5% to $323,200.
Baldwin County commercial real estate activity gained significant traction in the first part of 2019, rising 21.3% for a total of 181 transactions. Total sales volume, however, fell by (10.1%) to $117.1 million. Likewise, the average and median sales prices declined, falling (28.2%) to $608,700, and (27.2%) to $271,300 respectively.
Mobile County, Q1-Q2, 2019
A total of 3,127 existing single-family homes sold during the first two quarters of 2019, an increase of 1.8% over the same period last year. Average sales prices fell by (3.6%) year-over-year, ending at $133,700. Median prices rose, however, by 16.4% to $127,900. Existing home sales volume totaled $413.4 million, a slight decrease of (3.0%) compared to the first two quarters of 2018.
New single-family home sales totaled 139, a decrease of (18.7%) versus the comparable period in 2018. Similarly, total sales volume also declined (17.0%) to $31.3 million. Average sales prices showed a 4.1% increase, rising to $229,600, while median sales prices dipped slightly by (0.6%) to $210,600.
Overall, Mobile County condominium sales declined year-over-year by (21.6%) totaling 91 units. Total sales volume also fell to $12.6 million, a (24.5% decline). Average and median sales prices also experienced declines. Average prices fell by (6.9%) to $135,900 and median sales prices fell by (12.3%) to $116,000.
Mobile County commercial real estate sales transactions totaled 195, a (24.1%) decrease year-over-year. Sales volume also fell by (35.6%), finishing at $146.2 million for the first half of the year. The average commercial real estate sales price of $754,500 reflects a decline of (13.2%) over the same period in 2018. However, the median sales price was 1.4% higher, finishing at $163,800 for the first two quarters of 2019.
As we look to the remainder of the year anticipating what may or may not happen in our real estate markets, it is helpful to bear in mind some key factors that can affect future real estate values and sales activity. For the new construction and remodeling sectors, both residential and commercial, the costs of labor and materials obviously are important. Currently, we are experiencing the tightest labor market in decades and construction workers in particular are in high demand; in reaction, many builders are paying higher wages. Likewise, although everyone who lives and works along the Gulf Coast is always hopeful that damages from hurricanes will have minimal impacts, any significant storms will tighten supplies for many building materials, which in turn, will push costs higher. As construction wages and building materials prices rise, so will the cost of purchasing a new home or buying and remodeling an existing one.
Less obvious perhaps, yet no less impactive are changes in the cost of money, especially the impact on a consumer’s ability to purchase real estate. On a 30-year, $200,000 mortgage loan, a 0.25% interest rate cut reduces the monthly payment by $21.67. While this may seem small, over the life of the loan, the consumer will save $7,801.89 in interest. Clearly, even small policy changes can yield significant effects.
In recent Snapshots, we discussed signals that subsequent to their December 2018 interest rate increase, the Federal Reserve may well hold off raising rates through the remainder of 2019. It seems now that the financial markets are anticipating a policy change that will lead to a decrease in interest rates. Whether such a cut, if at all, will be a quarter- or half-point, remains to be seen. What is clear though is that reducing the cost of money will likely result in a positive impact, an outcome which will be welcomed by all. As always, stay tuned as we continue to keep a close eye on our area’s real estate markets.
Until next time, from everyone at the Center, we wish you and yours all of the best.