Housing Slump Affects Birmingham Alabama Home Builders

I have been catching up on some reading on AL.com and found an article from the Birmingham News, Birmingham-Hoover Metro Area Building Area Hit Hard By New Home Downturn, which really put an excellent picture on the affects of the market downturn on new construction.

While reading the article there were a number of things that I felt were confirmations on things that we had been thinking and saying for months. For instance:

• “The slump is due to massive overbuilding, overlending and price escalation in the housing market.”
• “He saw the market begin to lose control in 2005.”
• The downturn is worse than he feared, Sandlin said. “Now we have to pay for the sins of those days.”
• “In the past, housing markets were steered back on course by changes in mortgage rates. This slump is different - it’s mostly due to having too much inventory, especially in the number of used homes listed for sale that compete against new ones.”

These are three quotes from the article. My thoughts on these are such, one of the things we have been saying is that you can out-build the market. The old idea, “Build It and They Will Come” isn’t always true. When you look at real estate trends year by year you can see that the Birmingham market had been consistently growing, but growth at that pace just wasn’t going to be sustained here. Over the past 12 months, there have been 34,925 new listings, 16,159 sold, and there are still 14,067 active listings today. That’s a lot of inventory! While no one wants builders to go out of business, we all have to realize that a slow down is required whether by choice or not, and the slow down we are seeing now is not what anyone would have chosen. But, as Sandlin stated above, “Now we have to pay for the sins of those days.”

However, let me note that Alabama is still doing better than average. On a list of all of the states with the amount of foreclosures they are facing per household, Alabama is at the bottom, #43, and that shows that while there is a crunch Alabamaians are holding tight and being responsible and resilient. With these characteristics, it is our opinion that we will recover and will recover strong.