Alabama Housing Affordability Increases Slightly in Fourth Quarter

Homes across Alabama became slightly more affordable during the fourth quarter of 2019 when compared to one year ago. Although the statewide median sales price increased roughly 8%, these price gains were offset by falling interest rates. The monthly average commitment rate for a 30-year fixed mortgage, as published by Freddie Mac, declined significantly from an average of 4.78% in the fourth quarter of 2018 to 3.70% during the fourth quarter of 2019. Median family income, median price of homes sold, and the interest rate are the three major components that fluctuate and affect the affordability of home ownership.

The Alabama Center for Real Estate’s Housing Affordability Index was calculated at 206.6 for the fourth quarter. This means that a family earning the statewide median family income of $63,500 had approximately 2.06 times the income necessary to qualify for a loan to purchase the statewide median priced home ($173,812). This calculation uses a loan-to-value ratio of 80% and also assumes standard underwriting criteria. The affordability score during the fourth quarter of 2018 was 187.3, 10.3% below the current reading. Home affordability also increased from the third quarter of 2018 when the statewide affordability score was 199.5. The 3.59% increase in affordability quarter-over-quarter was mainly due to seasonal declines in the statewide median sales price, while interest rates increased slightly from an average of 3.67% to 3.7%.

The Department of Housing and Urban Development publishes estimated median family income on an annual basis. During 2019, the statewide average was $63,500, up 5.5% from 2018, while the national average increased 5% to $75,500. Not surprisingly, this varies widely across the state. The three metro areas with the highest median family incomes are Huntsville ($84,900), Daphne-Fairhope-Foley ($80,500), and Birmingham-Hoover ($74,400), while the lowest are Anniston-Oxford-Jacksonville ($56,200), Dothan ($57,500), and Mobile ($60,600).

Alabama’s most affordable metro area during the fourth quarter of 2019 was Gadsden with an affordability score of 265.3. Florence-Muscle Shoals was a close second (265.2) while Anniston-Oxford was third with a score of 238.4. The state’s least affordable metro areas are Auburn-Opelika, Daphne-Fairhope-Foley, and Birmingham-Hoover, with scores of 157.1, 182.6, and 192.7 respectively, indicating that homes are relatively expensive in relation to average incomes in these areas. For a complete list of affordability scores across the state, see the two charts below.

Metropolitan Areas Ranked by Affordability

Non-Metropolitan Areas Ranked by Affordability