Is Huntsville, Alabama Still Affordable?

We keep hearing that Huntsville is one of the most affordable cities in the United States, but is Huntsville really still affordable?

Housing Affordability in Huntsville

Overall affordability is measured using a few metrics, one of those metrics is the housing affordability index. If the housing affordability index score is 100, the median income for that city is 100% of what you would need to buy the median price range home for that area.

In Huntsville, housing affordability index numbers have actually continued to decrease. Locally, the score for single family homes is down to 78 compared to 119 in 2021 and 137 in 2020. The score for townhome affordability is down to 110 from 155 in 2021 and 183 in 2020. This means the average income in Huntsville cannot afford the average single family home in Huntsville, but it can afford the average townhome or condo in this market.

Huntsville is still relatively affordable compared to other major cities. The median sales price for a home is $350,000 and we have high average incomes in our area. If you compare those numbers to the list that CNBC compiled of the 12 most unaffordable cities across the US, you'll see that our average incomes are high yet our median sales prices are still much lower than the rest of the country. However, I do think this gap is going to shrink between Huntsville and other major U.S. cities as we continue to grow in this area.

Future of Housing Affordability in Huntsville

The affordability challenge that we have in this area is only going to get worse moving forward. My opinion is that we haven't had price appreciation, we've actually had dollar devaluation since 40% of the US dollars have been printed in the last two years. If you're checking the headlines, that is unlikely to slow down.

The chart at 2:16 in the above video plots both monetary supply and home values. You'll see back in 2008, there was a huge difference between those numbers so prices came down in the market. In today's market, those two points are actually lined up. Unfortunately, with the current dollar devaluation and inflation, it actually continues to create a bigger wealth gap in this country. Owners of assets benefit from a high inflationary environment since their net worth increases along with that inflation. Renters are penalized in a high inflationary environment because rents continue to rise year after year but since they don’t actually own the asset, their net worth doesn’t increase.

In the current situation that we have, more and more people are being pushed out of the market due to higher prices, higher interest rates, and lower affordability. That is forcing more would be homebuyers, often millennial type homebuyers, into renting. As rents continue to rise it's unlikely that a lot of these buyers will ever be able to save up enough money to buy their first home, which is why a lot of people are coining the term ‘Renter Nation’.