Birmingham Alabama Housing Market REPORT
Birmingham, Alabama has come a long way from its Southern roots, though it retains its historic charm. Birmingham recently earned the title of being the South’s “Comeback Town.” The Birmingham AL real estate market continues to slow down due to high-interest rates. However, price increases in the Birmingham housing market are largely driven by tight inventory which can't meet the buyer demand.
According to a report published by the Alabama Center for Real Estate (ACRE), Birmingham residential sales for the third quarter of 2022 totaled 4325 units, representing a decrease of 740 transactions when compared to 5065 units that were sold in the third quarter of 2021. Compared to historical data, third-quarter sales are 8.96% above the 3-year quarterly average and 16.99% above the 5-year quarterly average.
The median selling price in Birmingham for the third quarter of 2022 was $294,817, a 9.60% increase from the third quarter of 2021's median selling price of $269,000. The average selling price in Birmingham for the third quarter of 2022 was $346,142, a 7.72% increase from the third quarter of 2021’s average selling price of $321,333.
Birmingham residential units available for sale in the third quarter of 2022 increased by 473 units when compared to the same period last year. Compared to historical data to the right, the third quarter months of supply is 4.86% below the 3-year quarterly average and 25.21% below the 5-year quarterly average. The # of months of supply stands at 2.5 months.
Birmingham Metro Housing Market Trends & Forecast 2023
Data by Redfin shows that the Birmingham housing market is somewhat competitive. Homes in Birmingham receive 2 offers on average and sell in around 45.5 days. The average homes sell for about 3% below the list price and go pending in around 46 days. Hot listings can sell for about 1% above the list price and go pending in around 26 days.
In December 2022, Birmingham home prices were up 19.1% compared to last year, selling for a median price of $214K. On average, homes in Birmingham sell after 50 days on the market compared to 42 days last year. There were 176 homes sold in December this year, down from 337 last year.
The typical home value in Birmingham is $113,709 (Zillow Home Value Index). Birmingham home values have gone up 11.8% over the past year. According to statistics from NeighborhoodScout, in the last twelve months( (2021 Q3 – 2022 Q3), Birmingham's rate of appreciation has been 16.22 percent. The most recent quarter's (2022 Q2 – 2022 Q3) house appreciation rates in Birmingham were 4.56 percent, which amounts to an annual appreciation rate of 19.52 percent.
However, the real estate market has screeched to a halt, and some economists believe home prices are about to drop significantly in 2023. The home prices may remain flat or rise very modestly in Birmingham in 2023. Zillow latest forecast shows that home prices in Birmingham Metro may drop by 0.6% between November 2022 to November 2023.
Latest Birmingham Housing Market Statistics (Residential)
The latest monthly report published by ACRE Media shows that home sales in the Birmingham metropolitan area decreased by 31.4 percent YoY in November 2022. According to the Greater Alabama MLS, home sales in the Birmingham area decreased from 1,454 to 998 closed transactions. Following seasonal trends, sales decreased by 10.3% from October. Sales are down 12.5% year-to-date. Homes sold in November averaged 24 days on the market (DOM), 15 days slower than in November 2021.
Birmingham Housing Inventory: November listings (3,455) decreased 5.3% from October and increased 36.4% from one year ago. At the current sales pace, all the active inventory on the market would sell in 3.5 months, up from 3.3 months in October and up from 1.7 months in November 2021. The equilibrium point where buyers and sellers have roughly equal bargaining power is 4-5 months of supply.
Birmingham Home Prices: Home sales price growth moderated in November with the statewide median sales price rising 6.8% Y/Y, down from an average of 14.3% from January-October 2022 and reaching single digits for the first time since September 2021. The statewide median sales price decreased by 4.9% from the record high reached in October 2022.
Forecast: Going forward, slowing sales and rising inventory are likely to result in home price growth moderating to the 8-10% range by year-end. November sales were 390 units, or 28.1%, below the Alabama Center for Real Estate’s (ACRE) monthly forecast. ACRE projected 1,388 sales for the month, while actual sales were 998 units. ACRE forecast a total of 16,686 sales year-to-date, while there were 15,363 actual sales through November, a difference of 7.9%.
New Construction: The 105 new homes sold represent 10.5% of all residential sales in the Birmingham area in November. Total sales decreased 40.3% year-over-year. The median sales price in November was $388,490, a decrease of 12.7% from October and an increase of 15.7% from one year ago.
Birmingham Real Estate Investment Overview
Investing in real estate is touted as a great way to become wealthy. Is Birmingham rental property good for investment? Planning to invest in the Birmingham, AL real estate market? Many real estate investors have asked themselves if buying a property in Birmingham is a good investment. You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Birmingham housing market forecast for answers on why to put resources into this sizzling market.
Home prices in Birmingham have been trending up year over year. One of the benefits of the Birmingham AL real estate market is that it is incredibly stable and steady, and investors can purchase Birmingham investment properties for $80,000 to $100,000. This makes it a prominent place for new investors to get their feet wet and for anyone searching for a good investment that can create a stable monthly rental income. It is seeing faster-than-average appreciation, but it has never been subject to the wild swings that have hit the coasts or other “hot” markets.
For example, a quarter of its population is made up of Millennials, and they’re buying an increasing number of homes. They bought almost a quarter of all homes in the area in 2013, and that ratio is only going to rise. Conversely, this means that you know there are buyers for homes when sold by downsizing Baby Boomers. If you buy Birmingham AL real estate, you know you’ll be able to sell it for what you paid for it if not get a little bit more. Here are the top 10 reasons to invest in Birmingham real estate.
Birmingham Real Estate Is Affordable
Birmingham AL real estate is affordable for investors. The typical home in Alabama is worth $218,421 according to Zillow. The typical value of homes in Birmingham is $113,709 as of Dec 2022, up 11.8% over the past year. For many considering relocating in search of work, Alabama’s very low cost of living – including housing – is reason enough to move there instead of Texas or Florida. Birmingham AL's real estate market remains among the most affordable markets in the nation, which bodes well for homeowners, investors, and renters alike.
The typical home value in Birmingham is less than $115,000. Compare this to a typical home price in Dallas, Texas for around $326,938. This means real estate investors could buy two to three properties in Birmingham for the price of a home in Dallas, sometimes considered one of the hottest real estate markets in the country. You could buy several rental homes in Birmingham for the price of a single property in an expensive market in California.
Suppose you don’t want to buy rental real estate in Birmingham. It is a million-person plus metro area, so there are opportunities to invest in the suburbs, as well. Graysville is one such suburb, and its typical home value is $125,447 (ZHVI). The typical home value in Adamsville is $145,009 while a typical Pleasant Grove home costs around $242,136. This makes Birmingham AL real estate an excellent opportunity since you can buy upscale suburban homes for less than a fixer-upper in the inner ring suburbs of many other cities.
The Area Is Growing, Both in Population and Rental Demand
There has been a distinct trend of people moving to the largest metropolitan area in the region in order to find the greatest opportunities. The Birmingham area is home to more than 1.1 million people. LendingTree ranked the Birmingham area as one of the least competitive real estate markets in the country. There were more potential buyers than sellers, forcing many would-be homeowners to rent instead.
The U.S. Census Bureau released data last year that showed major growth in several Birmingham metro counties from 2010 to 2020. According to the data, Huntsville is now the largest city, with Birmingham the second largest. But the Birmingham Area Metro is twice the size of the Huntsville Metro. Birmingham’s population is 200,733, that’s down 1.5 percent since 2010. Huntsville has 215,006 people, that’s up 11.2 percent since 2010. The Birmingham Metro population is 1.1 million people and the Huntsville Metro has 491,000.
It Is Landlord Friendly
No one wants to buy rental real estate in a market where it is almost impossible to evict a tenant for nonpayment. Birmingham AL real estate is attractive in part because of how landlord-friendly the area is. Alabama passed laws in 2014 that made things more favorable to landlords. Proposed 2018 legislation would make it easier for landlords to make tenants have to leave if they breached their lease contract.
Birmingham Is a Low Tax Haven For Real Estate Investors
State and local taxes are one of the biggest deciding factors real estate investors need to consider. Alabama has some of the lowest property tax rates in the nation. In 2017, Alabama’s effective tax rate was 0.48% and the average property tax bill was only $776 it ranked #2 for the lowest property taxes. According to LendingTree, the annual median property taxes in Birmingham, Ala. — where homeowners pay the least in real estate taxes — are about $7,700 cheaper than in the New York metro area, where they’re the highest.
Birmingham, Ala., is the only metro where median property taxes are less than $1,000 a year. The median amount of property taxes paid by homeowners in Birmingham is only $909. For comparison, residents in the next two metros with the lowest median real estate taxes — New Orleans and Louisville, Ky. — owe $1,345 and $1,563 a year, respectively.
The Rental Pool’s Incomes Are Rising
Alabama is seeing an increase in incomes and the skills of its privately employed sector. Birmingham is attracting jobs in law, medicine, nursing & engineering. For example, Autocar and Mercedes Benz are investing more than a billion dollars in Birmingham, bringing high-paying jobs to the area. Unemployment has been below 5% for years. As people move to the area in search of work, they often find themselves renting because of how hard it is to find a home.
The latest data shows that the State's seasonally adjusted unemployment rate, at 2.7 percent in November, less than the national unemployment rate of 3.7%. The rate was unchanged from the October revised rate and below the 3.1 percent recorded a year ago. November’s rate represented 63,043 unemployed persons, compared to 61,721 in October and 69,688 in November of 2021. The comparable national rate for November, at 3.7 percent, was unchanged from the October revised rate, and below the year-ago rate of 4.2 percent.
Conclusion
If you are a beginner in the business of cash flow real estate investing, it is very important to read good books on real estate. Most investors naturally gravitate to residential property investment. When looking for the best real estate investments, you should focus on markets with relatively high population and employment growth. Both of them translate into high demand for housing. If the housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.
Buying an investment property is different from buying an owner-occupied home. Our Birmingham investment properties are designed to make money as rentals, which means you must look at it solely as an income-producing entity just like any other business. These are “Turnkey Cash Flow Investment Properties” located in some of the best neighborhoods of Birmingham.
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Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
REFERENCES
Market Data, Trends, and Statistics
https://www.greateralabamamls.com/
https://birminghamrealtors.com/
https://acre.culverhouse.ua.edu/research/residential-research/birmingham/
https://www.zillow.com/Birmingham-al/home-values
https://www.neighborhoodscout.com/al/birmingham/real-estate
https://www.redfin.com/city/1823/AL/Birmingham/housing-market
https://www.realtor.com/realestateandhomes-search/Birmingham_AL/overview
Population & Jobs
http://www2.labor.alabama.gov/
https://www.wbrc.com/2021/08/12/birmingham-metro-area-counties-grow-over-last-decade-birmingham-now-2nd-largest-city/
Alabama property tax rate
https://www.lendingtree.com/home/mortgage/real-estate-taxes-in-metropolitan-areas/
https://www.usatoday.com/story/money/personalfinance/2017/04/16/comparing-average-property-taxes-all-50-states-and-dc/100314754
Landlord friendly laws
https://www.al.com/news/mobile/index.ssf/2018/03/post_141.html?__vfz=rtw_top_pages%3D2480300011984
Lending Tree least competitive real estate market, lots of prime credit ubyers
https://patch.com/alabama/birmingham-al/birmingham-one-countys-least-competitive-housing-markets
Millennials buying homes
http://www.builderonline.com/money/top-10-markets-attracting-millennial-buyers_o
