Why Investors Are Flocking to Huntsville's Real Estate Market in 2020

Demand for real estate and rental property in Huntsville is so high that there’s only about a five-week supply of housing inventory listed for sale today. 

Developers in the Huntsville metro area simply haven’t been able to keep up with demand. A low supply of housing helps to explain why rent rates in the city grew by 9% last year and why one major financial publication ranks Huntsville among the top seven smaller towns worth your investment dollars.

Huntsville is located in the Tennessee River Valley in the northernmost part of Alabama. It’s the 4th largest city in Alabama and part of the 2nd most populated metropolitan area in the state. 

The economy of Huntsville is driven by a dynamic mix of private and public industry sectors including aerospace, defense, technology, and education. As an extra bonus for rental property investors, Alabama A&M and the University of Alabama in Huntsville supply a steady stream of students looking for off-campus housing paid for by their parents.

The rising job and population growth of Huntsville combined with a low cost of living and a high quality of life help explain why the Huntsville real estate market might continue to be an attractive investment in 2020.

>>Explore Roofstock's Huntsville investment properties here.

 

Population Growth

The Huntsville Real-Time News describes Huntsville as Alabama’s juggernaut city. But there's a lot more behind the steady 10-year rise in population than first meets the eye. 

The city has its first $1 million housing district, where average home sales have at least nine figures. At the same time, commercial development projects such as the Facebook data center and the $1.6 billion Mazda Toyota USA Manufacturing facility attract more people to the area looking for – and finding - well-paying jobs.

Key Population Stats:

  • City of Huntsville is home to more than 180,000 residents with more than 460,000 people living in the Huntsville MSA.
  • Major cities in metropolitan Huntsville include Decatur and Albertville.
  • Huntsville is the 4th largest city in Alabama and the 2nd most populous metro area in the state.
  • Population of Huntsville has grown by nearly 11% since 2010.
  • Within the next five years Huntsville is projected to overtake Birmingham as Alabama’s largest city.
  • Estimated population of the Huntsville metro area is forecast to reach nearly 530,000 by 2030.
  • Median age in Huntsville is 36.9 years vs. state median age of 39.

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Job Market

“New jobs are coming by the thousands, roads are clogged with commuter traffic and new restaurants and stores seem to open daily,” according to a recent report from the Huntsville Real-Time News, and 2020 promises more of the same.

ABC news station WAAY 31 in Huntsville notes that billions of dollars of economic growth in the works for the metro area are expected to bring literally thousands of new jobs to Huntsville and Northern Alabama.

Key Employment Stats:

  • GDP of Huntsville MSA is nearly $27.6 billion, according to the Federal Reserve Bank of St. Louis, and has grown by more than 28% since 2010.
  • Unemployment rate in Huntsville is only 2.7%.
  • Huntsville Chamber of Commerce predicts year-over-year growth in GDP will be 1.8%.
  • Labor pool in Huntsville grew by 4.9% last year while per capita income soared by 5.6%.
  • Job growth in Huntsville is so strong that the Huntsville Business Journal predicts about 25,000 new jobs will need to be filled by 2023.
  • Kiplinger expects job growth in the State of Alabama to be 1.2% with jobs in the Huntsville metro area growing by nearly 3%.
  • Trends fueling economic growth in Alabama and Huntsville this year and beyond include hypersonic technologies, supply chain clusters, expanding aerospace capabilities, growing production lineups, and a strategic push for tech jobs.
  • Top industry sectors in Huntsville are aerospace and defense, advanced manufacturing, bioscience, and information technology.
  • Largest employers in the Huntsville metropolitan area include U.S. Army/Redstone Arsenal, NASA/Marshall Space Flight Center, Huntsville Hospital, Huntsville City Schools, The Boeing Company, City of Huntsville, and SAIC (Science Applications International Corporation.
  • University of Alabama in Huntsville, Alabama A&M, and J.F. Drake State Community and Technical College are three of the largest universities and colleges in Huntsville.
  • 90.4% of Huntsville residents have a high school degree or higher, while 42.9% hold a bachelor’s degree or advanced degree.
  • Major highways serving Huntsville include interstate highway I-565 and U.S. Highways 72 and 431.
  • Norfolk Southern and L&N provide freight rail service in the Huntsville metro area.
  • Inland Port of Huntsville provides truck, train, and air transport service through the Huntsville International Airport, Jetplex Industrial Park, and the International Intermodal Center.
  • Huntsville International Airport (HSV) serves more than 1.2 million passengers annually with nonstop service to major cities including Chicago, Dallas, Orlando, and Washington D.C.

 

Real Estate Market

The Huntsville Business Journal reports that the real estate market set a record pace throughout the entire year of 2019. Sales grew by more than 15% and the inventory of homes available for sale hit a 19-year low of only 993 houses listed for sale.

In fact, that inventory of available homes represents just 1.3 months of supply, meaning that the housing market in Huntsville strongly favors sellers. The National Association of Realtors (NAR) notes that a six month supply of homes indicates a relatively balanced market, while any supply less than six months tends to push prices up more rapidly.

Key Market Stats:

  • The median listing price of a house in Huntsville is $259,900 while the median selling price is $165,900 according to Zillow (as of February 2020).
  • Square foot listing price in Huntsville is $111 vs. $109 per square foot in the Huntsville metropolitan area.
  • Home values in Huntsville increased by 8.9% last year and by more than 27% since May 2013 based on the Zillow Home Value Index.
  • Average days on market is 66.
  • During the listing period 10.0% of the homes for sale in Huntsville have a reduction to the listing price.
  • 12.1% of the homes in Huntsville have a negative equity vs. 8.2% nationally.
  • 1.0% of the homes in Huntsville have a delinquent mortgage vs. 1.1% U.S. average.
  • Neighborhoods in Huntsville with the highest home values include Madison County, Meridianville, and Harvest.
  • Hazel Green and New Hope are two neighborhoods in Huntsville with the lowest home values.



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Attractive Renters’ Market

Huntsville is the top small metro area with the biggest rent hikes, according to the Birmingham Business Journal. With a rent growth rate of 7.9% in the city and more than 9% in the metro area, rent hikes in Huntsville far outpaced similar sized cities such as Bakersfield, Tacoma, and Tucson.

Rent growth is one reason why the Motley Fool lists Huntsville as one of the top 7 smaller towns worth investment dollars. The job market has grown by more than 13% in the last five years, but developers haven’t been able to keep up with the demand for housing in Huntsville. 

The rental market in Huntsville also has a high price-to-rent ratio driven by the shortage of housing and the demand for off campus housing from students attending Alabama A&M and The University of Alabama in Huntsville. 

Key Market Stats:

  • Median rent in Huntsville is $1,261 per month vs. $1,335 per month for the metropolitan area.
  • Rents in Huntsville increased by an average of 9% over the past year, according to RENTCafé.
  • 40% of the housing units in Huntsville rent for between $701 and $1,000 per month.
  • 42% of the households in Huntsville are renter-occupied.
  • Neighborhoods in Huntsville with the lowest rents include Baker Park, Blue Haven – Holly Acres, and Brookhurst where rents average $560 per month.
  • Neighborhoods in Huntsville with the highest rents include Piedmont, Thornton Acres, and The Ridge where average rents range from between $1,081 and $1,252 per month.



Historic Price Changes & Housing Affordability

One of the biggest challenges of investing in rental property is to find markets where the demand from tenants is strong and where home prices have a steady and relatively predictable increase.

To help home buyers and investors forecast the likelihood of future housing price increases the FHA publishes a quarterly report of the historic change in home prices for all markets in the U.S. The most recent FHA 2019 Q3 House Price Index report for the Huntsville MSA (including purchases and refinance mortgages) shows:

  • Over the past five years home prices have increased in Huntsville by 19.85%
  • Over the past year prices have increased by 6.85%
  • Over the last quarter home prices in Huntsville have increased by 2.38%

The Housing Affordability Index (HAI) is an indicator that investors can use to help predict the current and future demand for rental property. In general, the less affordable homes are the greater demand there is for rental property. 

However, in addition to price, factors such as demographics, lifestyle choices and available inventory also influence the demand for rental property. That helps to explain why in markets such as Huntsville where housing is relatively affordable, there are still a large percentage of renter-occupied households.

The Housing Affordability Index from the National Association of Realtors uses 100 as a baseline affordability index number. The greater a market’s HAI is above 100, the more affordable a market is, everything else being equal.

Based on the NAR’s latest report, the HAI for the Huntsville MSA was 203.4 in 2018, the most recent year available. This means that families here have a little more than twice the median income needed to purchase a median priced, single-family resale home in the Huntsville metro area.

 

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Quality of Life

Huntsville is one of those hidden gems that almost seem too good to be true. 

The city offers the best amenities of big city life with a distinctive small town charm. Younger residents of Huntsville brag about being nerdy - and who can blame them, when such a large percentage of the people here hold engineering jobs with NASA and the U.S. Army Redstone Arsenal.

Key Quality of Life Stats:

  • Job and population growth in Huntsville are strong while cost of living is 5% below the national average.
  • Forbes gives Huntsville strong rankings for education, job growth, and cost of doing business.
  • Huntsville receives “A” and “B+” grades from Niche.com for public schools, housing, family living, nightlife, and diversity.
  • U.S. News & World Report rates Huntsville as the 11th best place to live and the 80th best place to retire in the country.
  • Metropolitan Huntsville also receives high scores for value, job market, net migration, and quality of life.
  • Climate in Huntsville is humid subtropical with hot humid summers and normally mild winters.
  • Downtown Huntsville is undergoing dizzying development, with investments exceeding $400 million and 12 major construction projects planned or underway.
  • Historic Districts in Huntsville such as Twickenham and Five Points are home to lovingly- restored property with Greek Revival, Federal, and Queen Anne architectural styles.
  • Hampton Cove is part of the Robert Trent Jones Golf Trail and boasts two championship 18-hole golf courses.
  • Performing arts scene in Huntsville includes the Huntsville Symphony Orchestra, Renaissance Theatre, and Fantasy Playhouse Children’s Theatre.
  • Huntsville Hospital is ranked as one of the best hospitals in Alabama by U.S. News.
  • Huntsville Speedway is home to world-famous stock car racing while the Alabama A&M Bulldogs give college sports fans plenty to cheer about.



Get Out the Map

Where to begin your search? Roofstock created a heat map of Huntsville 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.

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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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Jeff Rohde

Author

Jeff Rohde

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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