Learn more about the housing market in Alabama

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life.  

Alabama Housing Market Overview 

As a Deep South state, Alabama is known for its diverse geography, Southern culture, and warm southern climate. Some of the largest Alabama cities by population include Huntsville, Montgomery, Birmingham, and Mobile, and the state is home to several successful industries including automobile manufacturing and hospitals, its largest by revenue in 2023 according to data from IBISWorld. 

At the beginning of 2024, Alabama’s housing market was predicted to rebound from previous end-of-year lows in 2023. As of April, this appears to be the case. Alabama’s market has indeed been improving in the past few months compared to the beginning of the year. In fact, real estate, rental, and leasing represented the second highest sector contributing to Alabama’s GDP in 2023, behind only manufacturing. 

Behind this housing market improvement are increased sales volume and listings in the past several months. Active residential listings in Alabama had an annual increase of 37.2%, according to the Alabama Political Reporter, and there were 15,071 currently listed homes in April, the highest number since June 2020. These improvements have also improved affordability – sales prices for homes in Alabama are declining by just under 5% year-over-year. 

Despite these marked improvements, however, the Alabama housing market is not without its challenges. Alabama Realtors wrote earlier this year that the state is facing the same “economic headwinds” as the rest of the nation: high interest rates topping 6%, rate lock, and macroeconomic concerns. Current homeowners report feeling stuck in their current homes until rate relief arrives in the form of federal rate cuts. Like many homeowners and would-be homeowners across the U.S., Alabama residents will continue to monitor the market for potential changes in inflation, interest rates, and affordability. 

Alabama Housing Market Trends 

To understand the Alabama real estate market, it’s important to keep up with trends. Let’s look at some key ones in Alabama: 

Note: These statistics are based on Redfin’s monthly housing data from April 2024.  

Median Home Price 

Alabama’s median sale price in April 2024 was $278,600, according to Redfin’s monthly housing market data. This is an increase of about 2.2% from April of last year. Median prices in Alabama’s major cities are slightly lower, with Birmingham at $132,847, Montgomery at $142,720, and Huntsville at $283,391. 

Number of Homes Sold in April 2024 

5,211 homes were sold in Alabama in April 2024, an increase of about 5.2% from last year. This metric gives us a good picture of the current sales volume in Alabama. However, keep in mind that this number might be inflated compared to other months since nationally speaking, sales usually peak during the spring and summer months and slow in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%. 

Median Days on Market

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM signals a highly competitive seller’s market with more pressure on buyers to make higher offers and remove contingencies. A higher DOM signals a buyer’s market as sales are slower and sellers have less leverage. 

The current median days on market (DOM) in Alabama as of April 2024 is 49 days. This means that listed homes in Alabama spend 49 days on the market on average. 

New Supply Statistics 

In 2021, there were about 2.12 new residential construction permits per 1,000 people in Alabama. Alabama’s rate of new construction is about average compared to other states. Increased housing supply is predicted to ease housing prices and increase affordability in many markets across the U.S. in 2024. 

Property Tax Rate 

The average property tax rate in Alabama according to Rocket Mortgage is 0.40%. This places Alabama’s average property tax rate as the second lowest in the U.S, with an average annual property tax of only $803.59. However, keep in mind that property taxes vary widely depending on the specific county of Alabama and the value of the home. 

Foreclosure Rate in Q1 of 2024 

In the first quarter of 2024, 1 in every 1,478 homes experienced a foreclosure filing (according to recent data from ATTOM). Based on this data, Alabama’s foreclosure rate is more or less average compared to other states. 

Hottest Local Markets in Alabama 

Here are a few of the top local housing markets in Alabama for 2024:

1. Huntsville

Huntsville is Alabama’s largest city, located in the Appalachian region of the state. Redfin describes Huntsville’s housing market as “somewhat competitive,” with a median home sales price of $340K in March 2024, up 2.4% since last year. Hot homes in the area can sell in as few as 11 days, and the city is seeing significant migration from more expensive cities like Washington, DC; Seattle; and Los Angeles. 

2. Montgomery

Montgomery is Alabama’s capital city and the birthplace of the Civil Rights Movement. The median listing price in Montgomery is lower than Huntsville’s, at $167K in April 2024. In fact, Rocket Homes reports that 55.4% of homes in the city sold below asking price last month. However, the city’s housing market remains a seller’s market as prices trend upward. 

3. Birmingham-Hoover

Birmingham is the county seat of Jefferson County, Alabama. Hoover, part of the Birmingham Metropolitan area, is known for its growing suburban communities with premium homes and public schools. The median listing price in Hoover as of April 2024 is $420K, substantially higher than the state’s average. Additionally, the number of home listings in Hoover is growing, and average days-on-market for properties in the city is declining month-over-month. 

Economic Factors Impacting the Alabama Housing Market 

A holistic view of Alabama’s housing market requires a basic understanding of the main economic drivers affecting the market. Let’s look at a few critical ones below: 

Mortgage Rates 

High mortgage rates are a continuing challenge for would-be homeowners across the U.S. Alabama’s average rate for 30-year fixed mortgages as of May 2024 is 6.913%, only slightly lower than the national average rate. 

Higher interest rates deter borrowing and discourage those who already own homes from putting their homes on the market. Many homeowners report feeling “locked in” to their current homes, as it is unlikely they will secure a mortgage rate as low as their current one on their next home. Prospective buyers in Alabama should monitor mortgage rates in the coming months for a better understanding of how they impact the housing market. 

Inflation and Cost of Living 

Mortgage rates are tied to inflation, another massive contributing factor to the affordability of housing and the state of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in Alabama. This means fewer people can truly afford to limit housing costs to less than 30% of their monthly income. 

Population Changes and Demographics 

Migration, population, and employment also affect the housing market in Alabama. According to the U.S. Bureau of Labor Statistics, Alabama’s unemployment rate was about 3% in April 2024. Compared to other states, Alabama’s unemployment rate is lower on average, meaning that most residents are able to find jobs within the state. However, job trends and movement within the state as well as the surrounding region can impact employment demographics and subsequently manipulate home prices from season to season. 

Alabama Housing Market Forecast 

As mentioned, Alabama’s housing market seems to be following through with predictions of growth and rebound for this year. As the real estate market nears its seasonal heating period, experts in Alabama predict a more active market, more home listings, more home construction, and increased inventory. These factors could lead to conditions ideal for buyers leading into the summer, although mortgage rates aren’t predicted to drop substantially. Overall, conditions for Alabama’s housing market are improving as the sentiment among home buyers becomes more optimistic into the summer of 2024. 

Likelihood of Alabama Housing Market Crash  

Most people tuned into real estate in Alabama agree that a housing market crash is unlikely. As is the case for many southern cities, Alabama has many benefits that will continue to attract new homeowners to the area, including low cost of living, low unemployment, and favorable tax policies. The state’s overall affordability and revitalized housing market means conditions are likely to remain positive into 2024. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at Alabama’s housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Lower income households continue to struggle in the current housing market. This trend appears likely to continue into the foreseeable future. Without enhanced supply or helpful subsidies, the outlook is that many Americans will still wrestle with housing affordability in the years to come.  

Alabama Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. 

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread.  

This short summary leads directly into Alabama’s current rental market. Below are just a few of the current trends for Alabama’s rental market based on data pulled from Zillow: 

Alabama Rental Market Key Trends 

• Median rent: $1,394 

• Month-over-month rent change: -$6 

• Year-over-year rent change: -$56 

• Available rentals: 5,724 

Conclusion 

Like many southern markets, Alabama’s housing market is one to watch in the coming months. Economic revitalization and shifting buyer priorities is leading many residents of traditionally expensive markets to seek opportunities with increased affordability, which Alabama certainly offers. Experts and analysts will continue to monitor this market, as well as nationwide factors like interest rates and new construction.