Alabama’s economy continues to show signs of broad-based strength, and the state’s housing market is helping fuel that momentum. May brought some of the strongest housing activity Alabama has seen in several years, with home transactions, sales volume, home prices, inventory, and construction activity all at or near levels last experienced in 2022 and 2023.

For REALTORS®, these trends point to an active market with meaningful opportunities for both buyers and sellers. At the same time, rising home prices and still-elevated mortgage rates are creating affordability concerns, particularly for first-time homebuyers.

Here's what recent data show and what it means for consumers.

Alabama recorded 6,938 home transactions in May, marking the highest monthly level since July 2023. That figure represented an 11.7% increase from April and an 11.7% increase compared to May 2025.

The increase reflects strong momentum in the thick of the summer homebuying season. Consumer demand remains present across the state, even as buyers continue to weigh higher monthly housing costs.

Total sold dollar volume, which represents the combined value of homes closed during the month, also reached a notable milestone. May’s sold dollar volume totaled $2.19 billion, the highest level since September 2022.

That represents:

• A 19% increase from April
• A 28.8% increase from May 2025
• Nearly $490 million more than the same month last year

Higher transaction activity and rising home values both contributed to the increase in total market volume.

Home prices continued to rise in May, reinforcing the strength of Alabama’s housing market. The statewide median home price increased 5.9% month over month and 16.6% year over year, reaching $279,185. That represents a $39,670 increase compared to May 2025.

Average sale prices also moved higher, increasing 6.5% from April and 14.9% from one year earlier. Price growth can be a positive signal for homeowners building equity, but it also creates additional challenges for consumers trying to enter the market.

For many prospective buyers, the issue is not in finding a home — but rather a home that fits within their budget once mortgage payments, insurance, taxes and other ownership costs are considered.

While market activity gained strength in May, housing affordability weakened. Alabama’s Housing Affordability Index fell to its lowest level since August 2023, largely due to rising home prices and mortgage rates that remain elevated compared to the historically low levels seen earlier this decade.

The average 30-year fixed mortgage rate was 6.44% in May. Although that marked the third consecutive monthly increase, it remained below the 6.82% average recorded one year earlier. It also remained below the 40-year average of 6.52% and the 50-year average of 7.67%.

Even so, today’s rates can significantly affect purchasing power. Higher borrowing costs, combined with rising prices, can make it more difficult for buyers to qualify for financing or compete for homes in their preferred price range.

This trend affects first-time buyers most, making REALTOR® guidance especially valuable as consumers evaluate financing options, available inventory and realistic expectations for their move.

The good news for buyers is that housing supply has improved. Alabama ended May with 21,241 active listings, the most since December 2018.

Active listings were:

• 7.8% higher than one year earlier
• 1.5% higher than April

Homes remained on the market for an average of 61 days, just two days longer than April and three days longer than the same period last year. This suggests that while buyers have more choices, well-priced and well-prepared homes can still attract attention.

However, the months of supply measure declined to 4.4 months in May, down from 4.8 months in April and 4.5 months from one year ago. As summer demand continues, inventory conditions may tighten further.

Construction activity is also supporting future supply. Building permits reached their highest level since May 2022, signaling confidence among builders and the potential for more housing options in the months ahead.

Alabama’s broader economic conditions continue to support the housing market. The state’s unemployment rate was 2.8% in April, below the national rate of 4.3%. April also marked the 13th consecutive month that Alabama’s unemployment rate remained below 3%.

A healthy labor market can help support housing demand by giving consumers greater confidence in their employment and financial stability. Still, affordability will remain an important issue to watch as home prices, mortgage rates and inventory levels evolve.

Alabama’s May housing data reflects a market with strong momentum and continued demand. For REALTORS®, the opportunity is to help consumers make informed decisions in a market that is active, competitive and increasingly shaped by affordability considerations.