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Photo by Erin Nelson Sweeney.
Carrie Lusk, a Realtor with Keller Williams, talks with Jerry Stennett as they prepare for Stennett’s home to be listed for sale.
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Photo by Erin Nelson Sweeney.
New home construction at Melrose Landing in Chelsea on Feb. 7.
As mortgage interest rates increased significantly in 2023, home sales in north Shelby County and Chelsea slowed from the previous year.
Last year’s decrease in home sales is largely related to interest rates spiking above 8%, the highest since 2000, according to Keller Williams Realtor Carrie Lusk, a Shelby County native and Mt Laurel resident. This caused many homeowners who otherwise might have been interested in selling their house to reconsider, she said.
“Rates had begun creeping up in 2022, and buyers thought the 4-5% range was high, but they just continued to rise,” she said. “Everybody kind of stopped. Sellers stopped wanting to list, and buyers stopped wanting to buy.”
Lusk said that in 2023, many clients either stopped looking or kept waiting.
“The high interest rates weeded out all but the most serious buyers who had to buy. However, many cash deals still happened, and many with sellers cashing out of their homes and using those proceeds to fund their next purchase without a loan,” she said. “Many began getting back into the market when less competition arose, and buyers could get sellers to even pay some closing costs or a rate buy-down.”
Shirley Hall, a Realtor with eXp Realty who sells homes in the Chelsea and north Shelby County areas, said she stayed pretty busy with sellers and buyers in 2023. The market leveled out and allowed buyers to purchase homes without having to go over list price, she said. However, she noted that home sales were less consistent than in previous years.
The median home price for Shelby County is $350,000. While there was still a demand for homes in the north Shelby and Chelsea areas, Lusk said many homeowners chose not to list their homes so they wouldn’t face higher mortgage payments.
“They would have to pay a higher price and a higher interest rate, so this perpetuates the lack of inventory and keeps it a seller’s market,” Lusk said.
Hall agreed that homeowners were reluctant to put their homes on the market in 2023 because they didn’t think they would be able to afford a new home with the rising interest rates.
“Most people found that they would have to buy a smaller home and have a larger payment if they decided to sell,” Hall said.
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A steady decline in sales
Lusk said that according to Multiple Listing Service data, home sales in the area were down 30% from 2022 to 2023. In Chelsea, 491 homes were sold in 2023, compared to 576 in 2022, a 15% percent reduction. That’s also compared to 695 homes sold in 2021 and 654 homes sold in 2020.
As for north Shelby County, including Greystone, home sales decreased 23% from 1,068 in 2022 to just 820 in 2023. The downward trend continued from 1,282 homes sold in 2021 and 1,302 in 2020.
Lusk added that with last year’s record-high home prices and low inventory, plus the current pace of new construction, the area is at least five to 10 years out from the point where available homes can meet buyer demands.
Hall said there was much lower demand for homes on the market last year because people weren’t willing to spend extra cash just to secure a home.
While prices inflated locally, they didn’t spike as high as in other areas of the country.
“Nationally, our area still has a great value of available homes and communities with amenities,” Lusk said.
What has increased is the number of out-of-state buyers looking in the north Shelby and Chelsea areas. Lusk said that she has recently shown houses to residents of Nevada, Chicago, New York, South Carolina, Tennessee and Texas.
“For what they could get for $1 million where they live, it may be a three-bedroom, two-bathroom house, versus what they could here: a lot more house for less money,” she said.
Photo by Erin Nelson Sweeney.
New home construction at Melrose Landing in Chelsea on Feb. 7.
What's ahead for 2024
Lusk believes it is still a sellers’ market in the coming year, with more buyers than available inventory. The average number of days on the market is less than a month, with north Shelby and Greystone at 23 and Chelsea at 25.
She said homes around the $500,000 range are the ones increasing prices at the highest percentage. Her advice for potential buyers is to stay within their budget and look at options that aren’t new construction.
“If you can afford it, whatever your budget is, a larger home already built and updated to your current home could be a better value per square foot than even a new construction-tract home,” Lusk said.
For those who choose a new build, some of the subdivisions with new homes include Hillsong at Mt Laurel, Melrose Landing off Shelby County 41 and Chelsea Park. As for those looking to purchase land, Lusk said that while there are some lots available, buyers have to be willing to pay the price.
Hall agreed that available land has been less affordable recently.
“A lot of people just want a couple of acres, but when you are purchasing less than 5 acres, it is going to cost anywhere from $15,000-$25,000 per acre,” she said. “That cuts into their housing budget to a point that they aren’t able to build what they want or need.”
Lusk said buyers coming from out of state or other parts of Alabama are often drawn by the north Shelby County area’s highly rated schools, public recreation, lower property taxes, lower crime rates and proximity to downtown Birmingham, a wide variety of communities and plenty of shopping options.
Hall described the area as family friendly, with plenty of things to do outdoors including festivals, farmers markets, community sports and more.
“The area is still small enough to make you feel cozy, and like you are among family,” she said. Lusk said there are “five Ds” that will continue to drive the market for sellers and buyers:
- Diamonds (marriage)
- Diapers (new babies)
- Debt (homeowners who have equity in a home can sell to at least break even in most markets)
- Divorce/death
- Downsizing
Aging Baby Boomers will also drive many to sell or renovate to age in place and stay put, which will prolong the seller market and low inventory. Many of these Baby Boomers are “trailing grandparents,” who move to a new area to live closer to grown children and their grandchildren, which Lusk said are generating some inventory but are also part of the buyer demand.
Is it a good time to purchase? Hall says yes.
“Gone are the days of 3% rates, but rates in the 5% range aren’t terrible,” she said. “The current rates are much lower than they were when I bought my first home, and you can always refinance if the rates drop enough for it to make sense for the homeowner.”
With spring coming, Lusk said the market usually gets busier due to warmer weather and homes showing well with green lawns and plants. People also start to prepare a move between 30 and 90 days before the school year ends.
Lusk said her advice to clients remains the same: it’s a good time to buy (or sell) if the time is right for them, and it’s better to be proactive than reactive. She suggests that potential sellers work with a local, experienced lender and Realtor to help maximize options and begin to prepare their homes as if they may sell it, so they can be ready if the perfect home comes on the market.
Based on the past few years’ hyperlocal market compared with the rest of the nation, homes in the area are not decreasing in value, and new construction home prices are not going lower, she said.
Lusk recommends buyers get prepared to decide quickly if a home they love comes on the market.
“Home values are holding and not declining, so prices for both new construction and resales will not decrease,” she said. “As soon as mortgage rates do drop, all the buyers who have been waiting on a drop will enter the market and create more competition, resulting in multiple offers on a property, bidding wars and price escalations.”
Part of that preparation, Lusk said, is speaking to a local, reputable mortgage loan officer about various options and scenarios.
“A high credit score will get you the lowest interest rate and lowest monthly payment. However, the best way is to have that lender calculate exactly what payment you can be approved for and then tailor your home search to that budget,” she said.
From a mortgage loan officer's perspective
Amber Brittain, the branch leader of Movement Mortgage in Chelsea, has worked in lending for the past 18 years.
While she isn’t able to quote exact interest rates, since they depend on an individual’s credit score, down payment and debt-to-income ratio, Brittain said the good news for 2024 is that rates have been drifting back down since December, after spiking to over 8% last fall.
“The Fed [Federal Reserve Board] has signaled multiple rate cuts in 2024, which will help bring stability back to the housing market,” Brittain said. “2024 is looking like a great housing market. Market experts say that the worst is behind, and there is good indication that rates will be cut this year.”
Brittain quoted from a Fannie Mae report that came out in mid-January, in which rate predictions were lowered, with a 30-year fixed mortgage rate to average 6.4% in the first quarter of 2024 (previously predicted at 7%) and down to 5.8% in the fourth quarter (previously predicted at 6.5%). She added that 2025 predictions were even lower.
She said that historical property appreciation in Shelby County is 7% per year over the last five years. Also, there are around 12,000 to 13,000 people who are not homeowners that can afford to purchase in Shelby County. Rates coming down generated new activity, she added.
Brittain said one of the ways that potential homebuyers can keep their monthly payments manageable is to start saving the amount they’ll need each month.
“If their rent is $1,500 a month and their mortgage payment would be $2,000 a month, save the $500 per month and get accustomed to paying that higher payment,” she said. “Those savings could also be used as a down payment.”
Hall also advised taking a hard look at your budget and buying a house that you can still afford if your financial situation changes.
“Don’t finance an amount that is going to cause great hardship should something happen to one spouse, or a job loss would cause great hardship. Just because you are pre-approved to buy a $500,000 house, doesn’t mean you should,” she said.
