Posted by Matt Curtis on Friday, December 30th, 2022 11:25am.
Is Huntsville, Alabama, a Top 10 real estate market to watch in 2023? The National Association of Realtors (NAR) seems to think so as they've ranked Huntsville number seven on their list of top cities in the US to watch in 2023.
The study was based on several factors. One of those factors was the Housing Affordability Index. How affordable is the city? Huntsville has been above 100 for several years, anything above 100 is more affordable and anything below 100 is less affordable. A score of 100 means the average income can purchase the average home in that area.
NAR is actually behind on Huntsville's data and gave us a score of 120 when we're actually a score of 80. That's actually going to affect our volume of real estate sales in 2023 as homes are less affordable so fewer people can afford the homes here. The question is, can builders keep up with the actual pricing demands in the area, create more affordable products, and especially focus on those townhome and condo-type products to keep that affordability high?
One of the stats I think jumped off a page and helped make Huntsville on this list is the percentage of renters that are actively renting but could afford the median sales price home in our area. The national average is sitting at 15%, Huntsville is at 29.1%. I think that's for a couple of reasons.
First, we are a transient town and we have a lot of people moving to the area who just have not found a home yet. Secondly, I think a big factor at play is we have a town full of engineers that are more conservative. I think a lot of them are sitting on the sidelines and once you see interest rates hit 5%, you're going to see a bump in both sales volume which will also create a bump in sales prices due to a lack of supply.
Job growth was another stat cited on why Huntsville will be a Top 10 housing market in 2023. This is a stat that I'm not sure they got right. They said Huntsville's job growth numbers came in at 2.1% versus 3.4% for the U.S. With our area booming, I can't believe we've only had 2.1% job growth.
Another stat that makes Huntsville jump off the charts compared to other cities is population growth. Population growth in the US is 0.01% on average, we're sitting at 1.8%. A lot of new families and individuals are moving to the area which is continuing to increase the demand with not enough supply.
The share of inbound moves for Huntsville is at 53.7%. That's important because right now we're experiencing what's called a mortgage rate locked down. We have a lot of sellers or would-be buyers sitting on the sidelines with rates starting in the 2’s or 3’s and are simply not motivated enough to move in a higher interest rate environment. The people that are transacting right now are renters and other life event things such as moving into the area. Since we've got such a high percentage of people moving into the area that is boding well for a 2023 real estate market for Huntsville.
Active listings is another key stat NAR focused on, Huntsville has had a high increase in the number of listings at 181.4%. That's a very strong thing going forward, as we see interest rates hit 5% once again, we're going to need supply to help keep prices somewhat moderate and also to fulfill all that demand. I think what's going to happen is that's going to help with our volume, but it's going to keep prices flat in 2023 as there are simply not as many buyers in the marketplace.
The NAR housing shortage tracker shows Huntsville at 1.3 versus an average of 5. That basically means for every new job that comes to the area, how many new homes are we building? We're at a very strong ratio as we're ramping up production. The question is going to be, how does that ratio look in 2023 as builders start to slow down their production or sell a lot of their inventory to these built-to-rent type communities? If that number can stay low, that's going to be a strong thing for the market overall because it's going to help satisfy a lot of that demand as new population growth is coming to the area.
Some of the stats were off in this article, however, several of those stats jumped off the page which helps make Huntsville one of the Top 10 real estate markets to watch in 2023. In 2023 I don't think we're going to see wild appreciation, I think all of these stats are actually building up for a very strong market in 2024 or whenever we see interest rates hit 5% again.
If you're looking to buy or sell and 2023 is your year to make a move, contact us today!