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ACRE releases Alabama Affordability Index for 1Q 2017

ACRE releases Alabama Affordability Index for 1Q 2017

Industries: Affordable Housing

Markets: Statewide

The Alabama Statewide Housing Affordability Index for the first quarter of 2017 was computed at.178.8. This quarter’s HAI decreased compared to last quarter’s index of 190.8. The HAI is at its lowest on a quarterly basis since the first quarter of 2007.

The above chart shows the first quarter of the Alabama Housing Affordability Index over the past 11 years. The affordability index for the first quarter of 2017 decreased from 209.4 during the first quarter of 2016 to 178.8 this year.    

The standard definition used by the Alabama Center for Real Estate in describing the statewide housing affordability index is as follows: “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.

The higher the index number is, the more affordable the housing.”  The median home price for the quarter used for the calculation is computed from the median prices of homes sold in the reported areas during the last three months in Alabama. The composite monthly interest rate is the average the interest rates of the three months of the quarter of the effective rate of the national averages for all major lenders of loans closed on conventional mortgages as published by the Federal Housing Finance Agency.

The Alabama Housing Affordability Index of 178.8 calculated for the first quarter of 2017 means that an Alabama family which earned the statewide median income of $55,500 had a little over 1.7 times the income needed to qualify for a loan to purchase the statewide median priced home.

Dothan, a city in the Metro Areas showed an affordability index of.245.9, approximately 2.4 times the income needed to qualify for a loan to purchase the statewide median priced home, while Lee County showed an affordability index of 233.9, which is over twice the necessary income for the statewide median home purchase.

The median price of homes sold and the composite monthly interest rate are the two primary factors that fluctuate and affect the affordability of homes in Alabama, as well as in the nation.   

The first quarter of 2017 showed an interest rate of 4.16%, an increase from 3.63% in the fourth quarter of 2016. The composite monthly interest rates from the first quarter of 2016 to the first quarter of 2017 are listed below:

Quarter

Composite Monthly Interest Rate

1Q 2017

4.16%

4Q 2016

3.63%

3Q 2016

3.73%

2Q 2016

3.94%

1Q 2016

3.90%

The following table shows the quarterly results in the median prices of homes sold from the first quarter of 2017 to the first quarter of 2017.

               Quarter

   Median Sales Price of Alabama Homes

1Q 2017

$147,785

4Q 2016

$151,934

3Q 2016

$159,351

2Q 2016

$166,035

The Estimated Median Family Income projections are produced by HUD and are provided annually.  Following are the changes in the projections from 2016 to 2017. The projections show increases in income in 10 of seventeen areas. This is compared to nine areas, of the seventeen shown, that had reductions from 2015 to 2016 in Alabama. The national median family income shows a slight decrease of 3.56 percent.

2017 Estimated Median Family Income (HUD)

 

2016

2017

% Inc./Dec.

Talladega Co

$46.400

$47,700

4.98%

Gadsden

51,200

54,700

6.8%

Walker

46,300

46,800

1.08%

Tuscaloosa

58,800

61,100

3.91%

Marshall

50,700

43,000

-15.19%

Lake Martin

48,100

48,500

0.83%

Cullman Co

48,800

48,000

-1.64%

Dothan

57,600

50,700

-11.9%

Mobile

52,900

55,100

4.16%

Calhoun Co

46,700

53,000

13.4%

Montgomery

60,400

59,700

-1.16%

Baldwin

61,100

61,500

0.65%

Muscle Shoals

54,200

53,500

-1.29%

Lee County

60,800

59,200

-2.6%

Birmingham

64,000

63,100

-1.4%

Huntsville

71,800

78,200

8.91%

Monroe Co

37,800

41,300

9.28%

Alabama Statewide

$55,500

$55,500

0.0%

US Average

53,300

55,200

3.56%

On the national scene, the National Housing Affordability Index for the first quarter of 2017 was 127.2, 2.93 percent shy of the fourth quarter. The national median sales price for the first quarter of 2017 was $231,233, showing a decrease in national housing prices from the fourth quarter’s median price of $233,100. 

A review of the first quarter in the 2017 Alabama Housing Affordability Index revealed that eight areas in the Metro Area group in Alabama showed a decrease from the previous quarter. Baldwin showed the most significant decrease from the fourth quarter of 2016 AHAI with an 18 percent decrease and an affordability index of 159.2, followed by Dothan with an HAI decrease of 17.5 percent which produced an affordability index of 245.9.

For the County Areas, the HAI results from the first quarter in 2017 showed that Monroe County had the strongest results and achieved a 2.4 percent increase with an affordability index of 209.4  (Please review the AHAI chart for specific details.)

*It should be noted that the numbers used to compute the AHAI reflect mostly urban areas, which have significantly higher income levels than those of rural areas in the state.  Also in smaller volume reporting areas, a relatively small change can cause a large percent of increase or decrease.  Please review the Monthly Housing Statistics posted on the ACRE website at http://www.acre.cba.ua.edu/ to review the volume of sales that produced the Median Home Price for each reporting area.

 Alabama Affordability Index Percent Change by Rank – 1Q 2017 vs. 4Q 2017

Metro Areas by Rank:

Baldwin

-18.7%

Tuscaloosa

-2.6%

Montgomery

-7.36%

Dothan

-17.5%

Lee

-8.74%

Birmingham

-7.59%

Huntsville

2.08%

Muscle Shoals

-7.4%

Mobile

-2.38%

Gadsden

0.13%

Calhoun

6.37%

 

County Areas by Rank:

Marshall County

-20.51%

Walker County

-5.26%

Talladega County

-3.65%

Lake Martin

-5.49%

Monroe County

2.4%

Cullman County

-7.8%

Statewide Avg. Percent Change:

 -6.27%

US Avg. Percent Change:

 -2.93%

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