Alabama Housing Affordability Index Highest Since First Quarter of 2005, According to UA Center

TUSCALOOSA, Ala. – The good news for Alabama residents is that housing is again becoming more affordable for home buyers, according to the Alabama Center for Real Estate at The University of Alabama. The first quarter results from the Alabama Housing Affordability Index are the highest since the first quarter of 2005.

The Alabama Housing Affordability Index, or AHAI, increased in the first quarter of 2008 to 169.4 from a fourth quarter 2007 showing of 155.4. This 9.02 percent increase showed a promising trend in the affordability of homes in Alabama as it improved on the previous quarter’s results.

This is the second quarter in which the AHAI showed gains. In the fourth quarter of 2007, the index increased from 142.5 in the third quarter of 2007 to 155.4 in the fourth quarter of 2007. On the national level, the affordability index went from 118.9 for the fourth quarter of 2007 to 135.8 for the first quarter, 2008.

The statewide housing affordability index is calculated as the ratio of the state’s actual median family income to the income needed to buy and finance the state’s median priced home. An index of 100 means 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. The higher the index number is the more affordable the housing.

The 169.4 index for the first quarter of 2008 means an Alabama family earning the state median income of $51,700 had about one and two thirds (or 1.69 times) the income needed to qualify for a loan to buy the statewide median priced home. Nationally, households earning the U.S. median income of $61,500 could better afford a $196,333 house which was the median price of a home across the nation.

“The improvement in the Alabama Housing Affordability Index in the first quarter of 2008 was due to a series of events during 2007 and early 2008 in the state housing market and the state economy which made it more affordable for Alabama residents to purchase a home,” said Shelby Batson, research coordinator for UA’s Alabama Center for Real Estate.

Batson said the fourth quarter of 2007 composite monthly interest rate of 6.42 dropped to 6.02 percent in the first quarter of 2008 and the estimated median family income in Alabama increased 6.16 percent, from $48,700 in 2007 to $51,700 in 2008.

“An additional change, an increase in the median sales price of Alabama homes in the markets that comprise the reporting areas, worked in the opposite direction, exerting downward pressure but not enough to prevent an increase in the affordability index,” Batson said.

“Typically, when the median sales price drops, the decrease contributes to an increase in the home affordability index. However, the median sales price in Alabama rose 1.55 percent from the fourth quarter of 2007 to the first quarter of 2008, from a yearly low of $130,260 to $132,280. Even with the increase, the Alabama Housing Affordability Index moved upward. This is significant news for those considering buying a home in Alabama.”

The national median sales price dropped from $206,200 in the fourth quarter of 2007 to $196,333 in the first quarter of 2008, a 4.79 percent decrease.

When the Alabama median sales price results for the first quarter of 2008 are compared to the results for the first quarter of 2007 on a year-over-year basis, the price showed a change from $134,957 to $132,280, a decrease of 1.98 percent, according to ACRE.

“It should be noted that the numbers used to compute the AHAI reflect mostly urban areas, which have significantly higher income levels than rural areas in the state,” Batson said.

The average composite effective mortgage interest rate for the first quarter of 2008 was 6.02 percent, compared to the fourth quarter ’07 average mortgage interest rate of 6.42 percent.

The estimated median family income for fiscal year 2008 for Alabama increased from $48,700 to $51,700, a 6.16 percent increase, while the national median income showed a smaller percent increase of 4.24 percent, from $59,000 in 2007 to $61,500 in 2008. All of the Alabama areas included in the affordability study showed median income increases with the exception of Dothan which showed a decrease of 0.62 percent.

As the first quarter of 2008 results of the Alabama Housing Affordability Index are reviewed by reporting location, Muscle Shoals, of the areas reported in the Metro Area grouping, showed the greatest percent of increase over the fourth quarter 2007 AHAI with an increase of 32.57 percent.

The next highest change was posted by Baldwin with a 20.66 percent increase. For the rest of the Metro Area, the results for each area for the first quarter 2008 over the previous quarter are as follows: Montgomery, 19.03 percent; Tuscaloosa, 17.57 percent; Lee County (Auburn, Opelika), 12.81 percent; Birmingham, 12.51 percent; Huntsville, 11.70 percent; Gadsden, 7.67 percent; and Calhoun County (Anniston) with a 7.06 percent increase. Dothan showed a 1.75 percent decrease along with a 2.35 percent decrease for Mobile for the same period.

For the counties, the AHAI results from the first quarter in 2008 show that Cullman County had a 27.22 percent increase over the previous quarter followed by Walker County with a 24.18 percent increase over the same time period. The results, for the rest of the county areas show Marshall County with a 15.25 percent increase and Lake Martin (Tallapoosa) with a 6.26 percent increase. Talladega County showed a 14.91 percent decrease along with Monroe County’s decrease of 31.13 percent.

The University of Alabama, a student-centered research university, is in the midst of planned, steady enrollment growth with a goal of reaching 28,000 students by 2010. This growth, which is positively impacting the campus and the state’s economy, is in keeping with UA’s vision to be the university of choice for the best and brightest students. UA, the state’s flagship university, is an academic community united in its commitment to enhancing the quality of life for all Alabamians.

Editors note: This representation is based in whole or in part on data supplied by the reporting boards/associations of REALTORS® or their Multiple Listing Service. The Alabama Real Estate Center does not guarantee and is in no way responsible for its accuracy. Any market data maintained by the Center does not necessarily include information on listings not published at the request of the seller, listings of brokers who are not members of a local board/association or MLS, unlisted properties, rental properties, etc.

The statistics included in this report reflect the residential sales of houses, condominiums, and townhomes. Historical Monthly Housing Statistics are available on the web at Alabama Center for Real Estate’s homepage – www.acre.cba.ua.edu.

Some of the totals in the report may vary due to rounding.

Sources: The Alabama Center for Real Estate, in the Culverhouse College of Commerce and Business Administration, at the University of Alabama and the Alabama Association of REALTORS. National data supplied by the Federal Housing Finance Board, and the Research Division of the National Association of REALTORS®.

Editor’s note: Charts summarizing this information may be obtained by contacting the Alabama Center for Real Estate, 205/348-4117 or see http://www.acre.cba.ua.edu/