Home LoansMortgage

Best Cities for Homeownership in Alabama

The Alabama housing market combines steady growth with affordability, something that the rest of the country can feel jealous about. Median sales prices reached $158,818 in 2018, a 4.6% increase over 2017.

But even with higher prices and interest rates in 2018, the market remained extremely affordable. The state’s housing affordability index in Q4 2018 was 187.3, meaning the average Alabama household income is more than 1.8 times the amount someone needs to qualify for a housing loan. This is much better than the national average of 140.1.

We wanted to dig deeper, beyond the state averages, to see which Alabama cities were the best for homeownership. For our review, we looked at factors like median house prices, commute times, housing costs and unemployment rates for all the metro/micro areas across the state.

Key findings:

  • The best place for homeownership in Alabama is the Enterprise Micro Area. It has a moderately high housing value ($160,500), a short average commute time (21.7 minutes) and monthly housing costs decreased from 2013 to 2017 (-1.88%).
  • The Huntsville Metro Area is the second best place for homeownership in Alabama. It has a high median housing value ($176,600), moderate home value appreciation (6.13%), and low change in housing costs (1.16%).
  • The worst place for homeownership in Alabama is the Anniston–Oxford–Jacksonville Metro Area. This area has a lower home value ($126,000) and high unemployment (10.1%).
  • The Selma Micro Area is another less desirable place for homeownership in Alabama. It has the lowest median home value ($89,500), the highest unemployment (13.7%), and home values actually depreciated from 2013 to 2017 (-0.89%).

The best cities for homeownership in Alabama

1. Enterprise

For our study, Enterprise scored the best of all areas in Alabama, as this area balances high property values with an excellent quality of life. Enterprise has one of the strongest economies in the state, with an unemployment rate of just 6%. And Enterprise residents aren’t caught up in traffic, as they have one of the shorter commute times with just 21.7 minutes on average. That’s one of the perks of living in a less dense area with just over 50,000 residents.

Enterprise is one of the more expensive parts of the state to buy a new home, with an average property value of $160,500. However, life gets more affordable afterwards for homeowners — Enterprise residents with a mortgage saw their housing costs decrease by 1.88% from 2013 to 2017.

2. Huntsville

The Huntsville Metro Area just fell short of the top ranking, thanks to its strong housing market. Huntsville had the second-highest median housing values in 2017 at $176,600. Homeowners saw a decent return on their investment: from 2013 to 2017, prices in this region went up 6.13%.

This put a little pressure on budgets as Huntsville was one of the few metro areas where homeowners saw their housing costs rise (by 1.16%). However, residents should be able to manage due to the region’s above-average economy for the state (6.6% unemployment) and short commute times (22.1 minutes).

3. Daphne–Fairhope–Foley

At the end of 2017, the U.S. Bureau of Labor Statistics (BLS) recognized the Daphne–Fairhope–Foley Metro Area as one of fastest-growing job markets nationwide. It added the seventh-greatest number of jobs of any city area in the country. As a result, Daphne–Fairhope–Foley had the lowest unemployment rate in the state (5.5%) as well as the highest median home values ($190,400).

Existing homeowners should be pleased with their finances because housing costs in this area also fell 2.38% from 2013 to 2017. If you move to Daphne–Fairhope–Foley, though, expect traffic. The area has the worst average commuting time at 27 minutes.

4. Auburn–Opelika

Auburn–Opelika is another hot job market, both in Alabama and nationwide. In 2017, it created the 16th largest number of jobs in the country and was the only other region besides Daphne–Fairhope–Foley to make the BLS rankings.

It’s a pricey market by Alabama standards, with the third-most expensive median housing prices ($168,400); homeowners also saw their housing costs go up by 2.36% between 2013 and 2017. However, home values are jumping even faster (5.05%) and Auburn–Opelika residents have reasonable commutes, only 22.2 minutes on average.

5. Valley

Housing prices in the Valley Micro Area are low today, with a median value of just $97,000. However, they might not stay this way for long — Valley housing prices appreciated by 12.79% from 2013 to 2017, the second largest increase in the state. This increase has not squeezed household budgets, though, as the cost of housing fell during this stretch by 2.38%.

The Valley Micro Area has an above-average economy for Alabama, with unemployment at 6.4%. Although Valley is one of the least-populated regions in the state, with this attractive market, that might change quickly.

6. Tuscaloosa

Tuscaloosa is not just the home of the University of Alabama, it’s also one of the better areas in the state for homeownership. The median house value in 2017 was $164,400, right in the Top 5. Homeowners have seen a nice return on their investment with a 7.17% increase from 2013 to 2017.

Now there are some downsides to Tuscaloosa. The unemployment rate is on the high side, at 7.4%. Homeowners have also seen a moderate increase in housing costs (1.23%) and commute times are just average. Something to keep in mind, even if you’re a diehard fan of the Crimson Tide.

7. Montgomery

Alabama’s capital offers another solid market for homeowners. It’s in the top three for median property values ($144,000) and average commute times (22.9 minutes). But even with state government jobs, Montgomery has just an average economy, with unemployment at 7.3%.

This seems to drag on home values, as the average property only appreciated by 1.98% from 2013 to 2017, barely any growth at all. While this has kept costs low, it’s a concern if you’re hoping to make money off your new home.

8. Troy

The Troy Micro Area is still one of the least-populated regions in Alabama but that is starting to change. Troy is one of the fastest-growing cities in the state, thanks to the popularity of Troy University. Being small has its perks: Troy residents have the shortest average commutes in the state, at just 20.4 minutes.

Median home values are also at a respectable $139,900, and monthly housing costs fell (by 2.28%) for property owners from 2013 to 2017. On the other hand, Troy still comes up short on the economic side of things, as property values only grew by 2.72% and the unemployment rate is 8.7%, the fifth-worst in Alabama.

9. Florence–Muscle Shoals

Up in northwest Alabama, “The Shoals” offer excellent fishing and a thriving music scene. The median property value is still an affordable $127,700, but this might not last forever. Property values went up by 7.40% from 2013 to 2017 as this region becomes more popular.

Homeowners should be even happier because they saw this sizable gain while their housing costs stayed nearly flat, with a small decrease of just -0.73%. The Florence–Muscle Shoals economy is about average, with unemployment at 6.7%.

10. Birmingham–Hoover

The Birmingham–Hoover metropolitan region has by far the most people in Alabama, with nearly three times the population of second-place Huntsville. With so many people, there’s bound to be traffic: Birmingham–Hoover had the third-worst commute time, at 26.2 minutes on average.

Birmingham-Hoover also has an above-average median property value ($166,900), and homes appreciated by 6.31% from 2013 to 2017. However, with a 6.8% unemployment rate, the region’s economy is just OK.

Homebuying tips for Alabama

If you’d like to move to any of these Alabama city areas, these tips will help you get through the homebuying process while using the available state resources.

Save for the down payment

If you’re going to take out a mortgage, the lender will need to see some sort of down payment for the cost of the house. Conventional lenders like banks used to require at least 20% of the purchase as a down payment, but these days you may qualify with a smaller amount, especially if you have good credit.

You could also apply for a loan through the Federal Housing Administration (FHA), a government agency, and they would only require a minimum down payment of 3.5%. Because median housing prices in Alabama are low, $158,818, you can make a much smaller down payment than in other parts of the country. You would only need to put down a little over $5,500 to meet the FHA minimum, if you qualify for this type of lending.

If you’re buying your first home or you haven’t owned a home in the last 10 years, Alabama just launched a new program to help you save money: The First-Time Homebuyer Savings Account. You can put up to $5,000 per year ($10,000 if you’re married) into this account. Whatever you add, as well as your account earnings, will be deductible from your state taxes. Those savings will help you reach the goal of homeownership more quickly.

Figure out your budget

Before looking at homes, consider applying to get a prequalified mortgage. The lender will ask for your income, debts and other assets. They could also check your credit report. With this info, they will estimate how much you could potentially borrow for a mortgage. This way you can start looking at houses in your budget range, rather than falling in love with a home you won’t be able to afford.

Research the area

With our research, you can figure out the best cities in Alabama for your next home. Then you can start identifying the neighborhoods you think would be the best fit based on your budget, commute, local schools, tax rates and nearby amenities.

If you need help researching properties, consider working with a local real estate agent. Members of the Alabama Association of REALTORS® must invest in professional development and follow a code of ethics when dealing with their clients. They will have firsthand experience with what’s available in your target market and can help with the negotiation, application and closing process.

Get a good deal

As you negotiate with property owners, make sure to consider the market you’re in. You’ll be in a much stronger bargaining position in areas where homes haven’t appreciated significantly, like Montgomery, so you can push for a lower price. But this would be harder to pull off in areas that have appreciated in the double digits, like Cullman and Valley.

To get the best deal on your mortgage, get your finances in order before applying by paying off your debt, saving more for a down payment and improving your credit score. This way you can qualify for a lower interest rate on your mortgage, which means you’ll pay less each month for your loan.

By putting in this extra effort before applying, you’ll stand out as a qualified buyer, which will help you lock down a good deal in any part of Alabama.

Methodology:

The methodology for this study was simple and straightforward.

1: Collect metropolitan statistical areas (“MSAs”) and micropolitan statistical area from the U.S. Census Bureau using 2017 population data.

2: Each MSA and micropolitan statistical area was ranked on a scale from 21 (Best) to 1 (Worst) for five different metrics. Those metrics are:

Median Home Value(21-Highest Value, 1-Lowest Value)

Unemployment Rate(21-Lowest Rate, 1-Highest Rate)

Average Commute Time(21-Shortest Time, 1-Longest Time)

Median Home Value Appreciation (2013-2017)(21-Greatest Appreciation, 1-Smallest Appreciation)

Median Change in Yearly Housing Costs (2013-2017)(21-Smallest Cost Change, 1-Greatest Positive Cost Change) – The formula for this metric is

(((Monthly Housing Costs for 2017 *12)+(Real Estate Tax for 2017))/ ((Monthly Housing Costs for 2013 *12)+(Real Estate Tax for 2013))-1)

3: An average score was then calculated for each MSA based upon the scores they received for each metric.

4: The MSAs and micropolitan statistical area were then ranked on a scale of 1 (Best) to 21 (Worst) based on their average score.

5: All metrics were ranked equally.

Data:

All data were obtained from the U.S. Census Bureau. More information on where the data came from is provided below:

2017 Median Home Value, Monthly Housing Costs, Real Estate Taxes

  • Filtered for all MSAs
  • Then filter for Financial Characteristics for housing units with a mortgage — 2013-2017 American Community Survey 5-Year Estimates

2017 Unemployment Rate and Median Commute Time

  • Filtered for all MSAs
  • Then filter for Selected Economic Characteristics — 2013-2017 American Community Survey 5-Year Estimates

2013 Median Home Value, Monthly Housing Costs, Real Estate Taxes

  • Filtered for all MSAs
  • Then filter for Financial Characteristics for housing units with a mortgage — 2013-2017 American Community Survey 5-Year Estimates
 

Compare Mortgage Loan Offers