TUSCALOOSA, Ala. — Purchasing a home in Alabama continues to be a challenge even with a 6.5% increase in affordability, according to a recent report from the Alabama Center for Real Estate (ACRE). In the Q1 2024 report of the Alabama Housing Affordability Index (AHAI™), Alabama recorded an affordability score of 130, up seven points from the Q4 2023 index of 123.
Despite 11 of the 12 metro areas across the state recording an increase in affordability from Q4 2023, Alabama’s overall affordability index score decreased 5.8% from last year’s mark of 138.
“Even with the slight increase in affordability from the prior quarter, it is a challenging market, especially for first-time homebuyers,” Stuart Norton, Associate Director of ACRE said. “Cost of living continues to increase, making it more difficult to save for a down payment.”
The statewide housing affordability index is calculated as the ratio of the state’s actual median family income to the income needed to purchase and finance the state’s median-priced home. An index number of 100 means that a family earning the state’s median income has just enough buying power to qualify for a loan on the state’s median-priced, single-family home, assuming standard underwriting criteria and a 20% down payment. The higher the index number is, the more affordable the housing.
According to the report, the estimated median family income rose 3.6% to $82,500 in Q1. With the increase in the median income, a household has 1.3 times the income needed to qualify for a loan to purchase a median-priced single-family home. In Alabama, the median sales price is $254,047.
Gadsden (166), Anniston-Oxford-Jacksonville (157) and Dothan (149) tallied the highest affordability index scores in the state, while Birmingham (132), Daphne-Fairhope-Foley (110), Auburn-Opelika (102) had the lowest.
Nationwide, the median family income also increased, rising 1.7% to $97,800. A household earning the median family income has 1.02 times the income necessary to qualify for a loan to purchase a median-priced home in the U.S., rising to $385,300 in Q1.
The AHAI™ uses interest rate data from the Freddie Mac’s Primary Mortgage Market Survey. According to the Q1 2024 survey, it recorded a composite monthly interest rate of 6.75%, down from the Q4 2023 mark of 7.29%. However, the latest data from Freddie Mac showed interest rates rose to an average of 6.99% in April.
“Affordability is likely to decrease during the second quarter. Rates are now back above 7% and the most recent inflation data makes a near-term rate cut seem unlikely,” Norton said.
The University of Alabama, part of The University of Alabama System, is the state’s flagship university. UA shapes a better world through its teaching, research and service. With a global reputation for excellence, UA provides an inclusive, forward-thinking environment and nearly 200 degree programs on a beautiful, student-centered campus. A leader in cutting-edge research, UA advances discovery, creative inquiry and knowledge through more than 30 research centers. As the state’s largest higher education institution, UA drives economic growth in Alabama and beyond.
