CENTER FOR BUSINESS AND ECONOMIC RESEARCH / THE UNIVERSITY OF ALABAMA
& ECONOMIC INDICATORS
Volume 67, Number 7
A
July 1998
Alabama Housing Affordability Index
First Quarter, 1998
lthough it’s hard to believe,
given how good the housing
market was in 1997, the first
quarter of 1998 started off better than
last year. This was the third consecutive quarter that housing affordability
increased in Alabama. The HAI is the
highest it has been in the last three
years.
Housing affordability also increased
nationwide during the first quarter of
1998, but the increase in the U.S.
Housing Affordability Index was
smaller. The strength of the residential
real estate market mirrors, and to some
extent is a contributing factor to, the
continued expansion of the U.S. economy. With incomes, employment, and
consumer confidence at record levels,
the housing market has remained
strong through the current economic
expansion.
The statewide HAI is calculated as the
ratio of the actual median family
income to the income required to purchase the median priced home in the
state. An index number of 100 indicates that a family earning the median
income has just enough buying power
to qualify for a mortgage on the median
priced, existing single family house,
given standard underwriting criteria.
The higher the index number, the more
affordable the housing. Statewide, Alabama families had over one and a half
times the income needed to purchase
the average median
priced, existing, single
family home.
The increase in first quarter housing affordability
resulted from a combination of lower mortgage
interest rates and a very
healthy increase in
median income throughout the state. Composite
mortgage interest rates
fell from 7.47 percent in
the last quarter of 1997 to 7.22 percent
in the first quarter of the current year.
Much more important, median income
in Alabama increased by 4.3 percent
between the 1997 and 1998 fiscal
years, rising from $37,100 to $38,700.
Growth in median income in Alabama
exceeded the national average of 4.1
percent increase.
The combination of declining interest
rates and rising median income more
than offset the very healthy increase in
median housing prices, which rose by
5.3 percent between the end of 1997
and the first three months of 1998.
Statewide, the median price of an existing, single family house in Alabama
rose from $91,522 to $96,697, or by
$5,175 between the fourth quarter of
last year and the first quarter of 1998.
If this rate of appreciation continues for
the remainder of the year, we will see
more than a 25 percent per annum
increase in home prices for 1998.
The Tuscaloosa metro area has the
dubious distinction of replacing Birmingham as the least affordable metro area
in the state. Once again the Huntsville
metro area led the state in housing
affordability. This distinction suggests
that families in the Huntsville metro
area who earn the median income,
which at $52,100 is the highest in the
state, have twice the income needed to
purchase the median price home, which
at $96,600 is one of the least expensive
locations in Alabama. In contrast, the
Tuscaloosa metro area reported a
median home price of over $114,000,
second only to the Birmingham metro
area, but a median income of only
$39,800. The highest median home
prices were recorded in Tallapoosa
County, reflecting the continued
strength of the second home and recreational property markets.
Leonard V. Zumpano
Alabama Taxable Retail Sales
Alabama retailers reported $2.63 billion in taxable sales during January 1998, just 1.0 percent higher than the January 1997
total. Strongest gains were in the general merchandise category, up 13 percent, and apparel, up 7.5 percent. Sales at eating
places rose 6.5 percent, while automotive sales gained 5 percent. Declines compared to January a year ago included food, off
2.8 percent; and drug stores, which fell 20.9 percent. Among the state's ten metro areas, only Tuscaloosa, Dothan, and Anniston managed to beat the statewide 1.0 percent increase.
1997
($ thousands)
February
2,654,242
March
3,057,273
April
2,983,111
May
3,076,300
June
2,959,101
July
3,011,722
August
3,056,161
September
2,928,226
October
2,975,492
November
2,859,689
December
3,551,506
1998
January
2,628,628
February
2,666,761
Average Weekly Hours
Average weekly hours worked continued to inch up in 1998, reflecting the use of increased overtime hours in the workplace.
Labor shortages and strong consumer demand is expected to continue to put pressure on the existing workforce and little relief
in overtime is expected in 1998. A slowing in the economy will likely be needed to see this index approach the 40 hours per
week level.
1997
March
41.9
April
41.3
May
41.8
June
41.4
July
41.2
August
41.6
September
42.2
October
42.1
November
42.6
December
42.9
1998
2
January
42.3
February
41.7
March
41.8
Alabama Business and Economic Indicators
Income Tax
The growth in income tax collections continued to slow in 1997, recording a 5.9 percent increase over the previous years. This
is down slightly from the 1996 growth rate of 6.1 percent. In total income tax dollars collected, the state received an additional
$123,648,000 in 1997, up from the increase of $121,059.000 in 1996. The slower growth rate in 1997 is thus a reflection of the
higher base upon which the percent change is determined.
1997
($ millions)
April
211.166
May
266.175
June
211.188
July
108.382
August
191.857
September
215.324
October
112.998
November
194.931
December
172.368
1998
January
160.412
February
224.271
March
198.912
April
229.326
Unemployment Rate
The unemployment rate held steady in 1997 at 5.1 percent, a two year record low. After two years at an average rate of 5.1
percent, or lower in some Metropolitan Areas, labor shortages are becoming commonplace. Labor supply constraints may
become the story in 1998 as economic growth continues to create jobs at a faster pace than the growth of the labor pool.
1997
March
5.1
April
5.2
May
5.2
June
5.3
July
5.3
August
5.1
September
5.1
October
4.9
November
4.7
December
4.6
1998
January
4.2
February
4.2
March
3.6
For more information about these and other Alabama economic indicators, please visit the CBER Internet site at
http://www.cba.ua.edu/~cber
Center for Business and Economic Research
3
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Alabama Housing Affordability Index
1st Quarter, 1998 and 4th Quarter, 1997
Metro Area/
County
Median
Income
Median
Price
Loan/Value
80%
Monthly
Payment
@ 7.22%
Anniston
Birmingham
Decatur
Dothan
Florence
Gadsden
Huntsville
Mobile*
Montgomery
Tuscaloosa
$37,500
44,000
43,000
38,700
37,800
34,900
52,100
37,600
43,700
39,800
$78,133
121,667
99,800
88,500
75,550
71,750
96,633
105,517
100,533
114,467
$62,507
97,333
79,840
70,800
60,440
57,400
77,307
84,413
80,427
91,573
$425
662
543
482
411
390
526
574
547
623
Cullman Co
Lee Co
Marshall Co
Tallapoosa Co
Walker Co
35,300
42,000
35,500
35,200
31,000
103,544
121,833
69,633
124,583
68,500
82,835
97,467
55,707
99,667
54,800
563
663
379
678
373
Statewide
Average
US Average
39,207
44,222
96,697
125,800
Required
Income
HA Index
1st Quarter
1998
HA Index
4th Quarter
1997
$5,102
7,944
6,516
5,778
4,933
4,685
6,310
6,890
6,564
7,474
$20,406
31,776
26,065
23,114
19,732
18,739
25,238
27,558
26,257
29,896
183.8
138.5
165.0
167.4
191.6
186.2
206.4
136.4
166.4
133.1
178.1
129.1
134.7
177.4
171.7
185.0
191.6
125.4
163.8
134.9
6,761
7,955
4,547
8,135
4,473
27,043
31,820
18,186
32,538
17,890
130.5
132.0
195.2
108.2
173.3
164.1
145.6
156.6
104.9
158.9
25,255
155.2
134.6
150.4
131.7
Annual
Payment
Sources: The Alabama Real Estate Research and Education Center, Culverhouse College of Commerce and Business Administration,
The University of Alabama and The Alabama Association of Realtors. National data supplied by the Federal Housing Finance
Board and the Research Division of the National Association of Realtors.
* The Mobile Metro Area, which is made up of Baldwin and Mobile counties, is atypical because of the higher concentration of vacation
properties in Baldwin County.
Alabama Business is a monthly publication of the Center for Business and Economic Research, Culverhouse College of Commerce, The
University of Alabama. Articles reflect the opinions of the authors, but not necessarily those of the staff of the Center, the faculty of the
Culverhouse College of Commerce, or the administrative officials of The University of Alabama.
All correspondence should be addressed to: Editor, Alabama Business, Center for Business and Economic Research, The University of
Alabama, Box 870221, Tuscaloosa, Alabama 35487-0221.
The University of Alabama
Center for Business and Economic Research
Box 870221
Tuscaloosa, Alabama 35487-0221
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