Photo by Erin Nelson Sweeney.
Lynne Dobbins, a staging coordinator, works with Jana Hanna, right, as they prepare a home for a showing on Feb. 14.
Despite higher mortgage interest rates, lower-than-average inventory and average home prices heading toward $600,000, area experts say Vestavia Hills remains one of the most in-demand residential real estate markets in the area.
In 2023, Vestavia Hills saw 610 homes sold, an 18% decrease from the 742 homes sold in 2022, according to statistics from the Greater Alabama Multiple Listing Service. However, the 2023 average sales price of $562,298 was 2% higher than the average of $551,365 in 2022, MLS statistics show.
Although the average days a house spent on the market ticked up slightly from 14 days in 2022 to 18 days in 2023 — a 29 percent increase — Vestavia Hills continued to be one of the most desirable communities compared to the 80-day average in Alabama.
Jana Hanna, a Realtor based out of the RealtySouth office on Acton Road, said the interest rate hikes in 2023 were responsible for the low inventory as many homeowners chose to hang on to their homes rather than put them on the market. However, Hanna said those who did sell in 2023 were in great shape due to the rapid appreciation in value that has almost doubled home prices in Vestavia Hills over the last five years.
“2023 was somewhat of a volatile market because we had a little bit of an interest rate hike, but overall it was a good sellers’ market for me personally just because of the low inventory of homes that were for sale,” Hanna said.
“The positive is, for the seller with very low inventory, that meant the competition was down among sellers,” Hanna added. “So if people were ready to buy, that was good for the seller because there were not a lot of homes on the market.”
Hanna said the most popular communities for potential homebuyers include the neighborhoods surrounding the Vestavia Hills Country Club, Countrywood, Coventry, Tanglewood and Liberty Park. However, she added that real estate in Vestavia estate communities is always popular for homebuyers, regardless of the community, due to the quality of the city’s schools.
“Obviously, Vestavia Hills is a wonderful place to live, but our school system is a driving force,” Hanna said. “People are relocating here, and one of the main things they look at is the high school, so that is a big push for Vestavia real estate.”
The 800-pound gorilla that affected the housing market in 2023 was, of course, interest rates. Rates for a 30-year mortgage rose to their highest level since 2000, topping out at 8% in November of 2023.
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Suburban new and existing home sales in the greater Birmingham area, listed by city with average price and square footage.
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By mid-February, interest rates on a 30-year mortgage had fallen below 7%, and Hanna believes they will continue to drop periodically throughout 2024. While she doesn’t think rates will go as low as 2% to 3%, she said 5% to 6% is realistic and manageable for buyers interested in Vestavia Hills.
“I think now that the sticker shock has worn off since rates aren’t at 8% and are coming back down,” Hanna said.
“I think it’s normalizing because, at the beginning of 2023, it was really hot, and then the Fed kept cranking up interest rates,” Hanna said, “but now I feel like it’s at a more stable place, and buyers are feeling a little bit more confident going into the marketplace. 2023 was down, but I feel comfortable going into 2024 that it’s going to pick back up.”
Craig Alverson of Liberty Mortgage in Vestavia Hills said 2023 was a difficult year for the mortgage industry, as homeowners took a wait-and-see approach to putting their homes up for sale. He said he expects inventory and demand to rise as rates settle during 2024.
“The default process is that as the rates continue to fall, inventory will start to increase as well as demand because a lot of people are sitting on the fence not wanting to sell because they’re thinking, ‘Why am I going to give up 3% on this house to go pay 6.5 on the next house right now?’” Alverson said. “‘I’ll have to buy less house than I have now in order to keep my payment the same.’ So there are a lot of people who are choosing not to sell at this point in time.”
Alverson’s father launched Liberty Mortgage 35 years ago and has been with the company for more than 20 years. He said one trend he has seen many times during his career occurs every four years and will happen in 2024 in conjunction with the presidential election.
“We’re in an election cycle, so we expect the Federal Reserve to lower interest rates at their next meeting, which hopefully will transition back to mortgage rates as well,” Alverson said. “This isn’t a party-sided thing. If Trump were in office and we were having the same sort of economic issues to deal with and you asked me this question, I’d answer it the same way.”
While there are many mortgage options available, including adjustable-rate mortgages that can lower monthly payments for a time, Alverson warns against ARMs during this period of market volatility, especially if the buyer expects to live in the home long term.
“Anybody who’s going to finance money for extended periods of time with a believable history of being in the home for five to seven years would be foolish to do an ARM in this market because there is just no benefit,” Alverson said.
Alverson explained that ARMs include an index and a margin, which determine the mortgage holder’s actual interest rate. While most indexes, backed by either the London Inter-Bank Offered Rate or U.S. Treasury Bills, remain fixed between 2% to 2.5%, the margins can fluctuate wildly. During the current market conditions, Alverson said homebuyers should avoid ARMs and stick with a traditional fixed-rate mortgage.
“If you look at the indexes right now, some of those indexes still are at 8%. If you add a margin to that at 2.5%, and if nothing were to change, you would be looking at a realized rate that would be higher than what you can get on that fixed rate after the first adjustment. That’s why we would shy away from ARM derivatives.”
For homeowners and homebuyers who are still a little wary of the market, Vestavia resident Charles Black has developed a new website to help them navigate it. A software developer and CEO of the RES health care analytics company, Black became frustrated after he and his wife began looking for a second home and thought there had to be a way to make offers on homes that weren’t on the market.
“We thought we want to be in a specific community, and there are 300 homes in that area, but only a handful of them are for sale,” Black said. “That whole process made me sit there and say there’s got to be a better way.”
After months of development, Black launched Off Market Group, a website allowing homeowners to accept anonymous offers from potential homebuyers. The site — off-marketgroup.com — is a free service for both audiences, and he said he believes OMG is a potential game changer for the real estate industry, especially during a tight market like the last few years.
On the site, a homeowner can post their home and establish a minimum offer and allow potential buyers to make offers. The website automatically rejects offers under the established minimum but sends a notification to the homeowner of an offer at or above the threshold. At that point, the homeowner and potential buyer can begin negotiations.
“The goal with OMG is to essentially take it from where you — the real estate agent or the homebuyer — can go after 1% of houses to, instead, you — the real estate agent or the homebuyer — can go after 100% of houses. It’s that simple.”
Black said he set the site as a free service and makes no income from the site and doesn’t track any financial information. The site recently had more than 3,000 listed homes, and Black said more than 130 offers have been made since the site went live in 2023.
