What are the most affordable residential real estate markets in Alabama?

What are the most affordable residential real estate markets in Alabama?
Housing affordability is a relationship between an area's median family income and its median home price. (iStock)

Real estate markets across Alabama are red hot. Total residential sales are growing in spite of low inventory levels and rising interest rates. Demand for new and existing homes is strong, and this is reflected in the average number of days on the market trending downward in a majority of Alabama’s markets.

With the summer buying months still ahead of us, it is time to take a look at housing affordability to see how Alabama’s markets compare to one another. But first, let’s see how the state compares to the nation as a whole.

The Alabama Housing Affordability Index (AHAI) for the first quarter of 2018 was calculated at 214.4. This means that a family earning Alabama’s median family income of $60,200 has a little more than 2.14 times the required income to qualify for a loan to buy the statewide median-price home, which was $148,366 during the first quarter of 2018. The National Housing Affordability Index for the first quarter of 2018 was calculated at 155.7. A family earning the nationwide median family income of $71,900 had a little more than 1.55 times the necessary income to buy the nationwide median-priced home, which was $244,033. So even though median family income nationwide is 19.4 percent greater than median family income in Alabama, Alabama continues to be a more affordable market because our real estate prices are significantly lower than national averages.

To read the Alabama Center for Real Estate’s entire Q1 2018 Alabama Housing Affordability Index, with a detailed explanation of the AHAI’s methodology, click here.

Decatur is the state’s most affordable metro market, when you consider both its family incomes and its home prices. (iStock)

Alabama’s Most Affordable Metropolitan Areas

The table shows Alabama’s most affordable metropolitan areas. There are 12 of these areas in the state, according to the Center for Business and Economic Research (CBER) at the University of Alabama. Alabama’s metropolitan areas are Anniston-Oxford-Jacksonville, Auburn-Opelika, Birmingham-Hoover, Daphne-Fairhope-Foley, Decatur, Dothan, Florence-Muscle Shoals, Gadsden, Huntsville, Mobile, Montgomery and Tuscaloosa.

The smallest metro area in terms of population is Gadsden, with 102,564 residents in the metro area in 2016. Gadsden’s population is slowly declining according to Census data, and CBER projects that the Gadsden metro-area population will drop by 3.7 percent with 100,612 projected residents in 2030.

The largest is Birmingham-Hoover, with 1,147,417 residents in the seven-county metro area. CBER projects a 7.3 percent increase in population to 1,210,100 residents by 2030.

The fastest-growing metro area in the state is Daphne-Fairhope-Foley. There were 208,563 residents in the metro area during 2016. CBER projects that the metro population will increase 43.6 percent from 2010 to reach 261,777 in 2030.

The most affordable metro areas in Alabama, ranked by ACRE’s Alabama Housing Affordability Index, are Decatur (238), Anniston-Oxford-Jacksonville (237.9), Florence-Muscle Shoals (236.9), Gadsden (236.1) and Montgomery (225.3). It is interesting that the two metro areas with the highest median family incomes, Birmingham-Hoover with $71,000 and Huntsville with $78,000, did not make the top five most affordable metro areas. This is due, not surprisingly, to relatively high median sales prices in each area: $191,633 in Birmingham-Hoover and $191,500 in Huntsville.

The least affordable metro areas are Daphne-Fairhope-Foley (156.8) and Auburn-Opelika (160.2). Both areas have median family incomes significantly above the state average, but are also home to median sales prices in the low 200s range: $233,833 for Daphne-Fairhope-Foley and $220,620 for Auburn-Opelika. It should be noted, however, that the median price in Daphne-Fairhope-Foley includes condominium sales, many of which are of the ultra-luxury, beachfront type. Both areas’ affordability index scores are close to the nationwide score of 155.7.

Marshall County is home to Lake Guntersville — and the state’s most affordable housing among non-metropolitan areas, according to ACRE. (Brittany Faush/Alabama NewsCenter)

Alabama’s Most Affordable Non-Metropolitan Areas

The most affordable non-metropolitan areas in Alabama are Marshall County (232.8), Monroe County (216.1), Walker County (205.9), Cullman County (176) and Talladega County (174).

At $52,700, Marshall County has the highest median family income of Alabama’s non-metro areas, and it increased 22.6 percent from 2017. This is due to Marshall County’s proximity to the Huntsville metro area and overall job growth in north Alabama. Huntsville-area real estate, again, is somewhat expensive, so it is not surprising that many people buy houses in nearby areas like Marshall County and commute to Huntsville for work.

The least affordable non-metropolitan area is Tallapoosa County, with an AHAI score of 133.4. It is also the only area that has a score below the national score of 155.7. However, Tallapoosa County’s median sales price of $206,333 includes a significant number of expensive waterfront homes on Lake Martin. During the first quarter of 2018, 42.5 percent of residential sales in the area were waterfront homes, many of which are vacation properties. The median sales price of waterfront homes during the first quarter was $440,833, while the median sales price for non-waterfront homes was $115,800. Re-calculating the AHAI score for Tallapoosa County to include only non-waterfront homes, one gets an affordability score of 237.7.

Stuart Norton is the research coordinator at the Alabama Center for Real Estate.

The core purpose of the Alabama Center for Real Estate (ACRE) is to be a resource for Alabama’s real estate community by advancing relationships and providing servant leadership with a passionate, adaptable and humble spirit.

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