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Photo by Erin Nelson Sweeney.
Reba Myer stages one of the new townhomes for sale on 18th Street South.
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The year 2023 was another slow one for the housing market in Homewood, as rising interest rates kept people out of the market. However, home values stayed strong, and Realtors are expecting activity to pick up this year.
The number of home closings in Homewood declined 21% from 381 in 2022 to 300 in 2023, according to data from the Greater Alabama Multiple Listing Service. That’s also down 39% from a peak of 495 home closings in 2019.
Average sale prices in Homewood declined by 3% from $534,542 in 2022 to $518,359 in 2023. But prices still were 30% higher than in 2019, when the average price was $399,913, MLS data shows.
“It is a seller’s market still,” said Reba Myer, a Realtor with LAH Sotheby’s International Realty’s office in Homewood for 15 years.
Photo by Erin Nelson Sweeney.
Realtor Jamie Goff talks with Beatriz Leon-Ruiz and Andre Ballesteros-Tato about their home as they prepare to put it on the market.
Jamie Goff, an associate broker with ARC Realty in Homewood with more than 20 years of experience in the market, agreed. Even though the number of sales has declined, sellers still generally get multiple offers to consider and potential buyers are putting fewer contingencies into contracts to try to gain a competitive advantage, Goff said. Buyers have continued to get into bidding wars, and the average sale price was still slightly above the average listing price, she said.
“This is kind of telling of Homewood,” Goff said. “There is so much market demand still because of UAB.”
The University of Alabama at Birmingham, which includes UAB Hospital, is the largest employer in the metro area (and the state) with 28,000 employees, and many of those people want to live close to where they work, especially in the medical community, Goff said.
Homewood is one of the closest communities to UAB and has one of the highest-ranked school systems in the state, which makes it an attractive choice, she said.
Homewood also is popular because of its walkability and tight-knit community feel, Myer said. Houses are close together, and many houses in Homewood also are within walking distance of shops and restaurants, she said. “Homewood really is like a family — a community.”
Suburban new and existing home sales in the greater Birmingham area, listed by city with average price and square footage.
Hot spots
The hottest part of the residential real estate market in Homewood in 2023 was Edgewood, with 67 home sales in total, according to MLS stats. Those sales represented 22% of the total sales in the city by volume and 27% by dollar value. The average price of homes sold in Edgewood in 2023 was $632,614.
Goff said she remembers when Edgewood was considered more of a blue-collar area, but that has changed over time as people have bought older homes and remodeled them or torn them down and built new homes, she said. “Now, it’s priced a lot of people out of that market,” she said.
Hollywood was the second busiest community for home sales in 2023, with 33 sales averaging $702,239.
Hollywood has always been a hot spot and was considered the most desirable place to be in the early 2000s, Goff said. Its topography is somewhat limiting, so roads may or may not have sidewalks, she said. When Brookwood Village was active, that was a bonus for Hollywood, but now that the mall has almost entirely closed, Hollywood probably has suffered some because of that, she said.
But “it still is very desirable,” Goff said. “If it is in Homewood, it is desirable.”
West Homewood also is “coming into its own,” Goff said. The creation of Patriot Park, construction of a pool and addition of new businesses have created a new energy there and made it a more desirable place to live, she said. “People have a place to walk to.”
The Homewood community with the highest average home sale last year was Lakeview Estates, where one home sold for $1.8 million. The next highest averages were in Edgewood Gardens (one sale for $1.1 million), Old Saulter Estates (one sale for $1,055,000), Mayfair (12 sales with an average of $945,667), Huntington Ridge (one sale for $879,000) and Kendall Court (one sale for $875,000).
The communities with the highest average price per square foot were Hallman Hill ($451 per square foot), Parkridge ($416 per square foot), South Highland ($371 per square foot), Edgewood Highlands ($365 per square foot) and Edgewood Gardens ($353 per square foot).
While Homewood real estate prices declined by 3% on average in 2023, prices statewide rose slightly by 1% to $320,305 on average, according to MLS statistics.
The communities in the metro area that had the highest average price increases were Pinson (19% jump, to $241,433), Odenville (17%, to $253,917), Mountain Brook (7%, to $1,102,750), Trussville (4%, to $425,278), Hoover (4%, to $505,168) and Alabaster (3.5%, to $307,129).
Some areas other than Homewood that had decreases in average prices were Chelsea (6.6% drop, to $379,742), Moody (5.7%, to $272,461), Springville (4.5%, to $322,143), Helena (3.7%, to $352,877) and McCalla (3.6%, to $308,701).
In terms of average price per square foot, Homewood ranked second in the Birmingham-Hoover metro area in 2023, at $267 per square foot. That was behind only Mountain Brook, where homes sold for $317 per square foot. Homewood ranked 11th in the state, after Mentone ($477), Gulf Shores ($449), Gallant ($400), Jackson’s Gap ($387), Eclectic ($380), Dadeville ($346), Alexander City ($325), Abbeville ($296) and Orange Beach ($296).
Why the slowdown?
The driving force behind the slowdown in the market in 2023 was rising interest rates, Realtors say.
Thirty-year fixed mortgage rates had fallen to a historic low of 2.65% in January 2021, creating a surge in home buying, but rates climbed back up to 7% by October 2022 and continued rising through most of 2023, peaking at 7.79% in October 2023, according to Freddie Mac.
The higher rates made it less attractive for many people to sell their homes and move, Goff said. Even if they wanted to find an equal house in the same market, it was going to cost them significantly more money just because of the higher interest rates, Goff said.
She knows many people who talked about moving, but once they learned the cost per month to move, they decided to stay where they were, she said.
Mortgage brokers also saw the decline in business.
“[Mortgage] applications definitely slowed down as a result of the rise in rates,” said Tyler Hudson, a loan originator with Trustmark National Bank in Homewood.
About 40% of homeowners refinanced their loans in 2020 and 2021 when rates dipped to record lows, Hudson said. Even if they were thinking about selling their homes in 2023, the higher rates made it less attractive for them to do so.
That said, it was still a pretty strong housing market in Homewood and other over-the-mountain communities, with prices remaining fairly stable, Hudson said.
With buyers becoming more reluctant in 2023, some might have expected prices to fall more than they did, but the low inventory kept that from happening, Goff said. As of February, there was only about a one-month supply of homes on the market for sale in Homewood, according to MLS stats.
“It’s supply and demand,” Goff said. “If you have short supply and high demand, your prices are going to go up.”
What has been keeping the market going are the life changes that people go through, such as births, children growing up and needing more space, job changes, divorces, deaths and parents moving in with children, Goff said.
The average number of days a home stayed on the market in 2023 was the same as in 2022 — 16 days, Goff said.
What's next?
Experts in the industry are expecting an uptick in activity this year.
Mortgage interest rates started to drop toward the end of 2023 and were averaging 6.63% on Feb. 1 of this year. The Federal Reserve projected that by the end of 2024 it would make three quarter-point cuts in the federal funds rate, the rate at which banks borrow and lend their reserves to one another overnight.
Once the Fed cuts the federal funds rate, mortgage rates tend to follow a similar path, but mortgage rates actually follow the 10-year treasury rates more than the federal funds rate, Hudson said.
Regardless, “for 2024, we should see some decrease in the rates for sure,” he said. And home values in Homewood likely will increase, he said.
One big question mark about 2024 is whether the national elections will have an impact on the market, Goff said. Frequently, activity quiets down the closer an election gets, she said.
“Human nature is we don’t like uncertainty, and I think that’s the reason an election year winds up getting slower,” Goff said. “People wait and see who gets elected.”
Myer said she believes the Homewood real estate market will see a gradual shift from a clear sellers’ market to a more balanced market as interest rate speculation will become less of the focus in the market. “But, realistically, a true balanced market may not happen until the end of this year or first of next,” she said. “Those who have been waiting to put their homes on the market and make a move will make it a priority to do what is best for them and their families, whether that be to upsize, downsize, larger yard or different community. Whatever the case may be.”
