Close to Home: Prices stay low in Birmingham, Ala.

— -- A diverse economy helped boost Birmingham's housing market while much of the country suffered in turmoil. In 2006 and 2007, the largest city in Alabama experienced its best home sales periods ever, says Hal Tillman, president of the Birmingham Association of Realtors.

But it's hard to maintain such momentum. Sales are down significantly in 2008 because Birmingham is not immune from today's economic challenges, says Grayson Glaze, executive director of the Alabama Center for Real Estate.

Unemployment is rising, although it is not as high as in other parts of the nation, says Sam Addy, director of the Center for Business and Economic Research at the University of Alabama.

That's because the local economy has shifted from iron and steel mills to manufacturing. And over time it expanded into banking and health care. But even in Birmingham, housing sales have plummeted, in part because home buyers are worried about their financial futures and are holding back.

Home inventory has risen. But that is also because too many homes were built in recent years. As inventory became unrealistically high, home prices dropped, Tillman says.

"As the state's largest metro area, Birmingham has a greater share of distressed properties that continue to apply downward pricing pressures," Glaze says.

Unfortunately, many home buyers are not able to take advantage of the great deals because they are finding it harder to qualify for mortgages. And many don't have enough money for down payments.

Birmingham real estate "will continue to reflect a period of correction as fragile consumer demand and an overabundance of housing supply struggle toward greater balance," Glazer says.