How is The Housing Market in Montgomery, Alabama?
Montgomery Alabama Real Estate Market is hot in 2022. It is a good cash-flow market due to the strong demand for rental housing. And this is not entirely due to the 8 or more colleges and universities in the city. The cost of living in Montgomery is lower than the U.S. average while there are a number of good-paying jobs in the area.
Montgomery has seen the job market increase by 1.1% over the last year. Future job growth over the next ten years is predicted to be 30.3%. With affordable home prices, lower taxes, and a low cost of living, Montgomery is a great city to live in and invest in real estate. The median sales price in the Montgomery area was $196,00 in November 2022, an increase of 1.1% from one year ago and a decrease of -12.9% from October, according to the Montgomery Area Association of REALTORS.
The median home sale price — is the midway point of all the houses or units sold over a period of time. It offers a more accurate view of what's happening in a market. There is an acute shortage of inventory in the Montgomery area housing market. At the current sales pace, all the active inventory on the market would sell in 2.7 months (the # of months of supply).
According to the quarterly report published by Alabama Center for Real Estate (ACRE), Montgomery residential sales in the third quarter of 2022 totaled 1,518 units, representing a decrease of 16.8% when compared to 1,825 units that were sold in the third quarter of 2021. Compared to historical data, third-quarter sales are 7.0% below the 3-year quarterly average and 4.0% above the 5-year quarterly
The median sales price in Montgomery for the third quarter of 2022 was $223,000, a 5.9% increase from the third quarter of 2021's median sales price of $210,500. Compared to historical data, the third-quarter median sales price is 18.5% above the 3-year quarterly average and 27.8% above the 5-year quarterly average.
The average sales price in Montgomery for the third quarter of 2022 was $248,837, a 6.8% increase from the third quarter of 2021’s average sales price of $233,015. The average number of days on the market in the third quarter of 2022 was 47, representing a decrease of 16.0% from 56 days on market in the third quarter of 2021.
The average number of days on the market in the first quarter of 2022 was 54, representing a decrease of 34.8% from 83 days on market in the first quarter of 2021. The residential units available for sale in the first quarter of 2022 decreased by 29.2% when compared to the same period last year. The quarterly average of inventory for sale divided by the current quarterly sales average equals the # of months of supply, which was 1.7 months, up 36.8% as compared to the third quarter of 2021. The market is considered to be in balance at approximately 6 months of housing supply.
Montgomery Alabama Housing Market Trends – November
Home Sales: According to the Montgomery Area Association of REALTORS, in November, home sales in the area decreased 25.2% year-over-year (Y/Y) from 488 to 365 closed transactions. Following seasonal trends, sales also decreased 25.% from October. Sales are now down -13.1% year-to-date. These residential sales include existing single-family, condos, & new homes.
Home Prices: Montgomery Alabama real estate market trends show a 1.1% year-over-year rise in median sales price based on 365 home sales registered last month. The median sales price in November was $196,000. The differing sample size (number of residential sales of comparative months) can contribute to statistical volatility, including pricing. ACRE recommends consulting with a local real estate professional to discuss pricing, as it will vary from neighborhood to neighborhood.
Housing Inventory: Homes listed for sale increased 37.8% year-over-year from 670 to 923 listings. Months of supply increased from 1.3 in October 2021 to 2.3 in October 2022, reflecting a market where sellers generally have elevated bargaining power. Homes sold in October averaged 56 days on the market (DOM), 2 days slower than October 2021.
Housing Forecast: October sales were 135 units, or 25.1%, below the Alabama Center for Real Estate’s (ACRE) monthly forecast. ACRE projected 538 sales for the month, while actual sales were 403 units. ACRE forecast a total of 5,501 residential sales year-to-date, while there were 4,932 actual sales through October, a difference of 10.4%.
New Construction: The 73 new homes sold represent 18.1% of all residential sales in the area in October. Total sales increased 9.0% year-over-year. The median sales price in October was $352,325, an increase of 7.2% from one year ago and an increase of 1.5% from September. New homes sold in an average of 73 days, 22 days slower than in October 2021.
For all Montgomery-area housing data, click here.
Montgomery Alabama Housing Market Forecast
The current housing demand: According to Realtor.com, Montgomery County was a buyer's market in November 2022, which means that the supply of homes is greater than the demand for homes. The median listing home price in Montgomery County, AL was $179.9K, trending up 6.5% year-over-year. The median home sold price was $120K. Montgomery County has affordable townhomes and affordable condos. There are 18 cities in Montgomery County where Realtor.com has active listings. Grady has a median listing home price of $1.3M, making it the most expensive city. Ramer is the most affordable city, with a median listing home price of $165K.
Some of the lowest real estate appreciation rates in the country over the last ten years have been in Montgomery, where house values have increased by just 29.38%, which is an annualized rate of 2.61%. This rate is lower than the appreciation rate found in 90% of the cities and towns in America. Over the last year, Montgomery's appreciation rates have trailed the rest of the nation.
In the last twelve months (2021 Q2 – 2022 Q2), Montgomery's appreciation rate has been 14.33%, which is slightly above the national average. In the latest quarter tracked by NeighborhoodScout (2022 Q1 – 2022 Q2), the house appreciation rates in Montgomery were at 5.40%, which equates to an annual appreciation rate of 23.42%. However, the rising mortgage rates that have squashed demand and caused sales to plummet and home price appreciation to slow down.
According to Zillow.com, the typical home value in Montgomery County is $147,446. Montgomery County home values have gone up 15.4% over the past year. The Montgomery, Alabama Metropolitan Statistical Area (commonly known as the Tri-Counties or the River Region) is a metropolitan area in central Alabama. According to Zillow's latest forecast, home values in the Montgomery Metro Area are projected to decline by 1.4% from November 2022 to November 2023.
Montgomery Real Estate Investment Overview
The Montgomery Alabama real estate stands out for its affordable properties, relatively high rents, and numerous opportunities for deals. The relative breadth of its student housing market is remarkable given its small size. Here are some of the reasons to consider investing in Montgomery real estate.
A Big Student Market
Student housing offers stable income and better-than-average returns. Students care as much or more about safety, walking distance to school, and amenities than they do price. This is why cap rates for properties within half a mile of campus are so low; they rarely come on the market, and when they do, there is a bidding war. Investment opportunities do exist in older student housing that can be renovated and now rented out at a premium.
You’ll see steady turnover as people graduate, replaced by incoming freshmen. These tenants will never buy a home until after graduation, and if they have trouble paying the rent, getting a roommate is an acceptable solution. This makes the Montgomery Alabama real estate market perfect for those who want to invest in student housing since there are simply more universities in the area.
Montgomery Real Estate is Affordable
Montgomery real estate is cheap. The median home value in Montgomery is $143,142 as of Q2 2022. NeighborhoodScout’s Median Home Values combine data from the United States Bureau of the Census with quarterly house resale data provided to the FHFA by Fannie Mae and Freddie Mac. Around 33% of homes fall in the price segment of $128,001 – $255,000. Another 33% fall in the price segment of $64,001 – $128,000. Single-Family homes account for 68.7% of the housing units and around 47.7% are renters, which is quite a sizable population for rental property owners.
As of November 2022, the typical home value in the Montgomery MSA is $188335 whereas, in the city, it is $137,960 (Zillow Home Value Index). ZHVI is a smoothed, seasonally adjusted measure of the typical home value and market changes across a given region and housing type. It reflects the typical value for homes in the 35th to 65th percentile range.
While that is far lower than the national average, it is considerably cheaper. That said, affordability should continue to be the driving force of both supply and demand in the area. First-time buyers and Millennials should find the Montgomery home market more enticing than most others. Hence, Montgomery real estate investing should experience a boost in activity as well.
A Large Rental Market for Multi-Family Housing
While the cost of living and housing are both relatively low in Montgomery, many residents can’t earn enough to afford to buy a home. This created a relatively strong market for multi-family housing. As of December 25, 2022, the average rent for a 1-bedroom apartment in Montgomery, AL is currently $750. This is a 3% increase compared to the previous year.
- The average rent for a 2-bedroom apartment in Montgomery, AL is currently $850, a 0% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Montgomery, AL is currently $1,050, a 6% increase compared to the previous year.
- The average rent for a 4-bedroom apartment in Montgomery, AL is currently $1,298, a 3% decrease compared to the previous year.
Montgomery Alabama real estate is more than apartments for locals and students. The 2017 Realtors Confidence Index Report described the outlook for single-family homes in Alabama as “very strong”. Buyer traffic for Alabama was seen as strong. For seller traffic, Alabama was rated in that report as having moderate seller conditions, but all of the surrounding states were projected to be “weak” in that category.
Suburbs with Potential
Prattville is located near Montgomery, Alabama. Capitol Hill Golf Course is located here; that’s the site of the Nationwide Tour. The town’s population has grown by half in the past ten years. This is an excellent place to consider buying a rental home whether you’re catering to snowbirds or people relocating to the area before finding a permanent residence. The typical home here is worth around $245,990, a deal compared to other up-and-coming golf communities. Suburbs around Montgomery offer safety, space, and more modern amenities. Small towns around the city provide wide open spaces and privacy. Homes in Wetumpka have a typical price of around $241,435 (Nov 2022).
Highest Appreciating Montgomery Neighborhoods Since 2000
- Gunter Annex
- Cottage Hill
- Centennial Hill
- South Hull
- Maxwell Boulevard North / Maxwell Boulevard South
- Hayneville Rd Park
- Chisholm / Kilby
- Mount Meigs / Brassell
- Washington Park
- Deer Creek Blvd / Marston Way
- Tax-Friendly State
Alabama has incredibly low taxes. The state and local tax burden typically rank among the top ten (best) in the U.S. 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. The median property tax in Montgomery County, Alabama is $435 per year for a home worth the median value of $121,000. Montgomery County collects, on average, 0.36% of a property's assessed fair market value as property tax.
Montgomery County has one of the lowest median property tax rates in the country, with only two thousand five hundred thirty-eight of the 3143 counties collecting a lower property tax than Montgomery County. The average yearly property tax paid by Montgomery County residents amounts to about 0.74% of their yearly income. Montgomery County is ranked 2719th of the 3143 counties for property taxes as a percentage of median income.
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.
Market data and trends
Student housing market