Published September 19, 2022

Toady's Alabama Real Estate Market Trends & Analysis

Written by Justin Humphries

Toady's Alabama Real Estate Market Trends & Analysis header image.

The Alabama real estate market may be summed up in two words: relatively affordable. Despite median home values increasing for the better part of a decade, low-interest rates and improvements to the state’s median family income have made it easier for more people to actively participate in the housing market. Additionally, unemployment has dropped since last year, and confidence is starting to return to the market in the wake of the pandemic.

Summary

The latest trends witnessed in Alabama suggest the entire state’s economy is firing on all cylinders, and the housing market is no exception. Positive employment and wage growth, combined with affordable housing opportunities, have stimulated the Alabama real estate market more in 2019 than in years past. As a result, everyone participating in the industry has benefited: buyers, sellers, and real estate investors. With positive momentum showing no signs of slowing down, there may be no better time to get into the Alabama real estate market than now.

Alabama Housing Market Overview

Median Home Value: $172,932
Median Sales Price: $208,288 (+11.3% year over year)
Total Home Sales: 22,238 (+24.0% year over year)
1-Year Appreciation Rate: +13.0%
Average Days On Market: 53 (-38.6% year over year)
Total Homes Listed For Sale: 9,633 (-43.8% year over year)
Months Of Supply: 1.3
Median Rent Price: $1,023
Price-To-Rent Ratio: 13.72
Unemployment Rate: 3.3% (latest estimate by the Bureau Of Labor Statistics)
Population: 4,903,185 (latest estimate by the U.S. Census Bureau)
Median Household Income: $50,536 (latest estimate by the U.S. Census Bureau)

Alabama Median Home Prices

Like the rest of the country, the Alabama real estate market has seen its prices rise almost exponentially for close to 10 years. For most of the last decade, confidence in the housing sector and an expanding economy drove prices higher regularly. Since 2012, the median home value in Alabama has increased as much as 47.8%. However, the real story has more to do with what has transpired in the last year and a half. Since the introduction of the Coronavirus, the state's median home value increased by approximately 13.0%.

Increases in the last year are primarily the result of indicators created in the wake of COVID-19. In particular, the housing market has a healthy level of demand. More people are looking to buy because of historically low-interest rates, increased savings from more than a year of staying home, and rising prices. All things considered, more people are ready and willing to buy in Alabama than in recent history, which has drastically increased demand. That said, demand has outpaced supply for way too long. With a mere 1.3 months of available inventory, Alabama is far from a balanced market, with indicators favoring sellers. As a result, prices have tested new highs each month in 2021.

More importantly, price increases will continue for the rest of the year and most likely for at least two more years. As long as inventory remains low and demand remains high, prices will keep increasing. Fortunately, homebuilders are back to work and are starting to address the issue, but relief is far away. Homes are being built, but the vast majority of them are years out. Till then, it's safe to assume values will keep rising.

To be clear, many of the same indicators present in Alabama mimic those of the national real estate market. The current state of the Alabama housing market is directly correlated to a simultaneous increase in demand and decrease in available inventory; there simply aren’t enough homes to satiate the sheer volume of buyers. As a result, sellers have been able to increase prices accordingly. Nonetheless, prices in Alabama are still relatively affordable and represent a unique opportunity for local real estate investors.

Alabama Housing Market Predictions

Predicting the housing market without any degree of error is a fool’s errand, even in a state with the positive momentum Alabama has managed to generate; there’s always going to be at least a slight margin of error. Nonetheless, it is good practice to make well-informed, educated guesses. Maintaining a pulse on where the market currently rests and where it’s going will help real estate investors in Alabama maintain an edge over the competition. With that in mind, here are some of the Alabama housing market projections I feel are more likely to pan out:

Improving economic conditions and low-interest rates will continue to facilitate an active housing market: Not unlike the majority of markets across the country, Alabama is a lot better off today than it was at this time last year; that, combined with an improving economy, more savings, and historically low-interest rates should promote homeownership on a larger scale.
Despite historical appreciation rates, the Alabama real estate market will remain relatively affordable: Alabama real estate trends have kept pace with national trends, and year-over-year appreciation rates are no exception. 2021 marks the ninth consecutive year of appreciation in Alabama, but the state maintains a relatively affordable housing industry. In fact, it’s actually more affordable to own in most parts of the state than it is to rent, and appreciation isn't as high as the national average.
Inventory constraints will continue to increase median home values for the foreseeable future: Alabama has about 1.3 months of available inventory. However, a balanced market typically has about six months, which suggests Alabama has nowhere near as many listings as it would hope. As a result, competition will continue to increase over the homes that are listed, and prices will rise accordingly. An easement is on the way, but today’s inherent lack of available homes will push prices higher for at least the foreseeable future.