More than 17% of the homes sold in Birmingham are being bought by real estate investors, according to a recent article in HousingWire. In fact, Birmingham is the second-most popular market for investors, ahead of traditional hot spots such as Tampa, Las Vegas, and Phoenix.
What exactly is it that makes Birmingham an attractive market for real estate investors?
While there’s a strong demand for real estate in Birmingham, Alabama, the most populated city in the state offers so much more. Often referred to as the “cradle of the American Civil Rights Movement," Birmingham was founded back in 1871, right after the Civil War. Over its first 40 years Birmingham grew by an astounding 4,000% with an economy driven by mining and manufacturing.
Today, Birmingham has transformed itself into a medical research, banking, and services hub while maintaining its manufacturing roots. Nestled at the base of the Appalachian Mountains, the city boasts a vibrant downtown and world-class dining scene right in the middle of one of the country’s most livable cities.
Learn more about why investing in Birmingham real estate can still be a smart move in 2020.
Over the past ten years the population of Birmingham and Jefferson County (the county where Birmingham is located) has remained stable. While some residents have moved away, the area’s birthrate and strong inbound foreign migration have helped the metro area population to stay balanced.
Key Population Stats:
- Birmingham has a city population of more than 212,000 with more than 1.1 million residents in metropolitan Birmingham.
- Over the past ten years the population of the city has declined by 2,123 people or about 1%, according to the U.S. Census Bureau.
- Birmingham is the most populated city in Alabama and ranks 98th among the country’s 285 largest cities.
- Metropolitan Birmingham ranks 13th among the largest southeastern U.S. metro areas, and 48th among the nation’s top 366 metropolitan areas.
- The population of Birmingham is projected to increase by nearly 46,000 by 2040, based on a report from the Birmingham Business Journal.
The business climate in Alabama ranks among the best in the nation, while various publications including Indeed.com, fDi Magazine, and Business Facilities rank Birmingham as one of the top ten metro areas for growth in numerous economic categories.
Key Employment Stats:
- The GDP of Birmingham is nearly $56 billion, growing by about 10% over the last ten years.
- Job growth in Birmingham is 1.5% and hourly wages have grown by 3.9% over the last 12 months, based on research from the Birmingham Business Alliance 2019 Growth Report.
- Cost of living in the Birmingham metro area is 2% below the national average, according to Forbes.
- Unemployment in the Birmingham-Hoover MSA was just 2.2% in October 2019.
- The largest employers in the Birmingham metropolitan area include the U.S. government, University of Alabama at Birmingham, Alabama Power Company, Compass Bank, Regions Bank, and American Cast Iron Pipe Co. Inc., according to the City of Birmingham.
- Regions Financial Corporation is one Fortune 500 company located in Birmingham, while Vulcan Materials Company and Encompass Health are two Birmingham companies in the top 1000.
- Major insurance companies headquartered in Birmingham include Blue Cross and Blue Shield of Alabama, Protective Life, and ProAssurance, while Liberty National Insurance was originally founded in Birmingham.
- BE&K, Brasfield & Gorrie, Walter Schoel Engineering Company, and B.L. Harbert are a few of the huge international construction firms located in metro Birmingham.
- The Department of Innovation and Economic Development for the City of Birmingham is actively working to establish the city as a premier destination for innovative small business startups.
- Largest colleges and universities in the Birmingham area include University of Alabama at Birmingham, Virginia College at Birmingham, and Jefferson State Community College.
- 86% of the people in Birmingham 25 years or older are high school graduates or greater, while nearly 26% hold a bachelor’s or advanced degree.
- Interstate highways I-20, I-22, I-59, and I-65 connect Birmingham with other major metro areas in the southeastern U.S.
- Three major railroad freight lines serve Birmingham: Norfolk Southern, CSX Transportation, and BNSF Railway, along with several smaller regional railroads.
- Birmingham-Shuttlesworth International Airport (BHM) is home to four major airlines providing 160 daily flights to 37 cities for more than 3 million passengers each year.
- BHM serves as a major air cargo hub for central Alabama with a new 400,000 square foot Air Cargo Complex.
Real Estate Market
A recently released report from 6 WBRC in Birmingham notes that housing prices in Birmingham relative to other metro areas are much lower. The affordable home prices in the area have caught the attention of real estate investors. Birmingham’s solid economic base and outstanding real estate opportunities are perfect for both short-term investing and for rental property investors holding for the long term.
Key Market Stats:
- Median listing price of a home in Birmingham is $96,450 according to Zillow (as of Oct. 2019).
- Square foot listing price is $71 in the City of Birmingham, which is significantly lower than the average square foot listing price of $122 in the Birmingham-Hoover metro area.
- Over the past ten years the median listing price of houses in Birmingham has increased by more than 50%.
- Average days on market is 68.
- During the listing period, 16% of the homes have a reduction in the asking price.
- 26.5% of the homes in Birmingham have a negative equity vs. 8.2% U.S. average.
- 2.1% of the homes in Birmingham have a delinquent mortgage vs. 1.1% nationally.
- Mountain Brook and Vestavia Hills are two cities in the metro area with the highest median home values.
- Cities in the Birmingham metropolitan area with the lowest median home values include Tarrant and Fairfield.
Attractive Renters’ Market
Although housing in Birmingham remains relatively affordable, rising rents in Birmingham reflect both state and national trends, according to the Birmingham Business Journal. That’s one reason why Realtor.com ranks Birmingham as the second-most popular market for real estate investors.
Home sales in Birmingham are up 3% year-over-year and the supply of inventory is down 6% compared to last year. With a market short on supply and high on demand, the rental market in Birmingham is stronger than ever before.
Key Market Stats:
- Median rent in Birmingham is $787 per month vs. $1,202 for the Birmingham metro area (as of Oct. 2019).
- Rents in Birmingham have increased by 6% over the last 12 months, according to RENTCafé.
- 47% of the housing units in Birmingham are occupied by renters.
- 42% of the housing units in Birmingham rent for between $701 and $1,000 per month.
- 33% of the rents in Birmingham are in the $1,001 to $1,500 per month rental range.
- Neighborhoods in Birmingham with the lowest rents include Collegeville, Harriman Park, and North Birmingham where rents average $433 per month.
- Areas in Birmingham with the highest rents include Central City, Southside Birmingham, and Belle Meade where average monthly rents range between $1,517 and $1,642.
Historic Price Changes & Housing Affordability
There are a variety of financial metrics real estate investors use to analyze investment property in Birmingham. Two of the most useful metrics for rental property investors are historic pricing trends and the affordability of housing.
Every quarter, the Federal Housing Administration (FHA) publishes a report that tracks historic prices changes for housing in the top metro areas.
The most recent FHA 2019 Q2 House Price Index report for Birmingham shows that home prices in the Birmingham metro area have increased by more than 161% since Q1 1991. Over the past five years, home prices have increased more than 34% and grown by 0.62% from the last quarter.
Earlier this year, Kiplinger released the affordability index of home prices in the top 100 U.S. metro areas. Affordability compares median home prices to the percentage of annual income needed to purchase a home in Birmingham:
- Since the last real estate cycle market peak in May 2006, home prices in Birmingham have decreased by 8%.
- Since the last real estate cycle market bottom in March 2012, home prices in Birmingham have increased by more than 31.1%.
- Birmingham has an affordability index of 1 out of 10, meaning the metro area is one of the most affordable places to own a home in the U.S.
Quality of Life
A growing economy, affordable rents, and a great quality of life are just a few of the many reasons why people find Birmingham a great place to live. Downtown attractions like restaurants and breweries keep growing and commuting in from the most popular suburbs takes 20 minutes or less.
Key Quality of Life Stats:
- Residents of Birmingham overwhelmingly rank living in the city as excellent or very good, according to Niche.com.
- U.S. News & World Report rates Birmingham among the top 90 places to live in the U.S. and the 74th-best place to retire.
- Climate in Birmingham is near perfect, with wintertime temperatures around 54 and summer highs about 91 degrees.
- UAB Hospital has ten medical specialties that are ranked top 50 in the U.S.
- Vulcan Park and Museum, Birmingham Civil Rights Institute, and the Birmingham Museum of Art are rated among the top ten things to see and do by TripSavvy.
- Sidewalk Film Festival attracts independent filmmakers from around the world.
Get Out the Map
Where to begin your search? Roofstock created a heat map of Birmingham based on our Neighborhood Rating, a dynamic algorithm that enables you to make informed investment decisions by measuring school district quality, home values, employment rates, income levels and other vital investment criteria.
DARK GREEN: 4-5 star neighborhood
LIGHT GREEN: 3.5-4 star neighborhood
YELLOW: 2.5-3 star neighborhood
ORANGE: 2 star neighborhood
RED: 1 star neighborhood
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