Six Big Reasons to Invest in The Magic City Birmingham, AL
As a real estate investor, you know that the market you choose can have a big impact on your returns. You also know to look for a market with high yields that has strong economic growth, with high employment and a low cost of living. What you may not know is that Birmingham, AL can deliver all that, and so much more!
The Magic City has been undergoing a magical transformation over the past few years, making it both a great place to live and a great place to invest. In fact, both The New York Times and National Geographic have previously put the spotlight on Birmingham as a rising star with plenty of momentum, and that momentum has only grown over the past twelve months. With businesses investing billions, the Birmingham economy is booming and employment continues to rise. Our cultural cache is keeping up with industry’s brisk clip, as Birmingham’s culinary scene continues to draw acclaim - even being named Zagat’s No. 1 Up-and-Coming Food City . In addition to its world-class dining options and locally brewed craft beers, Birmingham boasts a lively theater scene, affordable real estate, and a surprisingly low cost of living.
If you thought Birmingham was just another Southern town, think again. Below, we’ll explore six major reasons the Magic City is one of the nation’s most promising markets for real estate investment.
Full Speed Ahead
With new developments in the auto industry leading the way, Birmingham’s explosive economic growth makes it a great place to live and work - and a fantastic place to invest - and everyone is taking note. The city has gotten plenty of press in the past few years, even being named one of the “Top Ten Hottest Housing Markets” by CNN Money, “The Silicon Valley of the Southeast” by Network World, and a “New Industrial Boomtown” by Forbes. From forums to financial news outlets, everyone in the real estate game has been following Birmingham’s rise. When you look at the all the new businesses, foreign investments, and job-creating projects in the works, these glowing reviews shouldn’t surprise you at all.
Ernst & Young ranked Alabama as the 4th biggest recipient of foreign investment spending for 2015 - investments that will continue to pay dividends for the economy in 2018 and beyond. Geopolitical strategist, Peter Zeihan, seconded those findings, attributing the foreign investment to Alabama’s strong auto manufacturing industry. Foreign investments continued throughout 2016, with $1.57 billion in direct capital investments pouring into the state, with nearly 16% of that going directly to Birmingham.
Though Birmingham’s economy is well-diversified, the auto industry continues to be a huge driver. Alabama recently won abid for the new $1.6 billion Toyota-Mazda plant, which is expected to create 4,000 jobs. In Birmingham, Autocar’s $120 million project and Mercedes-Benz’s $1 billion investment in electric car technology mean the auto industry will only continue to grow on both a state and local level.
Steady, Consistent Growth
Of course, experienced investors know there’s more to a successful real estate investment than flashy headlines. All those big projects and new investments need to translate into real jobs and real dollars to make Birmingham a worthwhile investment. Luckily, Birmingham continues to deliver when it comes to important metrics like unemployment and jobs growth.
While the most recent data for 2017 is not yet fully tabulated, Birmingham’s year-over-year unemployment numbers are some of the best in the nation. The current figure for November 2017 sits at a healthy 3.2%, putting Birmingham in the top 23% of all major metro areas. This rate marks a 2.1% decrease in unemployment since November of 2016, which is the most dramatic improvement in the nation for that period. What’s more, Birmingham’s unemployment rate is now a solid 0.7% lower than the national average.
In addition, Birmingham’s continuous economic growth means it consistently beats out the majority of other metro areas in GDP - ranking in the top 13.5% of all 382 metropolitan areas surveyed in 2016. Jobs creation in the Magic City is also strong, with Birmingham adding more than 4,300 new jobs in the past year. That trend is expected to continue due to the numerous development projects debuted in 2017 and those that continue into the current year. In fact, the 2018 North American Construction Forecast Report indicates that Birmingham will see a 13% increase in construction this year, largely bolstered by residential real estate development. After a robust 2017, this means even more new businesses, more jobs, and continued economic growth.
A City Renewed
While Birmingham may have been considered an overlooked real estate gem in the past, that time is quickly coming to an end. Things are happening in Birmingham and people are taking note. This is due, in part, to the fact that Birmingham has broad appeal - it truly has something for everyone.
Author Bruce Schoenfeld profiled Birmingham for National Geographic Traveler saying, “I’ve found a modern city that has retained its pace and charm, one with many of the accoutrements and attitudes of the New South but without the shiny facelessness common to too many cities around the region.” That goal, of keeping pace with the modern world without losing its unique charm, is reflected in the revitalization of the downtown area. Through financing and historic tax incentives, Birmingham has worked with local, national, and international industry to bring the Magic back to Birmingham, and the impact has been huge.
From the world-class culinary scene (including two James Beard-honored chefs) to the diverse job market, Birmingham isn’t just another Southern town. Ambitious construction and expansion projects have brought new business, strengthened existing industries, and returned historic buildings to former glory.
Far from the outdated Southern stereotype, Birmingham is a modern city that maintains it’s old-world charms. The revamped downtown has a number of unique and interesting destinations that attract residents and visitors alike, including the Jones Valley Teaching Farm, the gorgeous Alabama Theater, a bustling downtown restaurant and hotel district, and the only LEED-certified library in the state.
All these things considered, it’s no wonder that Forbes once listed Birmingham in the top 15 U.S. Cities’ Emerging Downtowns. The cultural renaissance, millennial interest, stable and growing real estate market, and undeniable economic growth all add up to make Birmingham an investment market unlike any other.
It’s Still A Steal
While the real estate market in Birmingham shows home values increasing over time, property prices are still remarkably affordable. In fact, housing prices in Birmingham beat out those in other major real estate markets by a wide margin. The average cost of housing in the Magic City is a full 236% lower than in Nashville when compared to the national average. Birmingham also handily beats out other popular markets around the country, like Philadelphia, Kansas City, and Dallas. When compared to the national average housing cost, Birmingham undercuts these markets by 17-142%! Though more affordable than Nashville, Dallas’ housing prices are a full 142% more expensive than in Birmingham.
This trend doesn’t just apply to housing. Forbes listed Birmingham as one of America’s most affordable cities, and it’s not hard to see why. In fact, Birmingham’s total cost of living is a full 27.4% lower than the national average, and the savings don’t stop there. Alabama has some of the lowest property tax rates in the nation, with Jefferson County’s effective property tax rate coming in at a measly 0.645%. The average property owner in Alabama pays just $528 per year in property taxes, nearly 75% less than the national average.
What’s more, Birmingham’s real estate market is historically very stable, without the wild ups and downs of larger markets like New York City and Los Angeles. Just like investing in the stock market, a good passive investment is built on a solid foundation of consistent upward growth, not volatile highs and lows. Birmingham’s consistently bullish real estate market has exactly the mix of stability and gradual appreciation that buy-and-hold investors are looking for.
A Foothold for the Future
There’s no denying that the Millennial generation is having a huge impact on markets across the country. A generation that is moving and shaking all over the nation cannot be ignored, and prominent investing and finance publications have spent the past few years emphasizing the importance of investing in markets that are attractive to Millennials. With Millennials starting twice as many new businesses as their parents’ generation, and starting them almost 8 full years earlier, this generation’s got momentum you don’t want to miss out on.
Birmingham - which was ranked second in the nation for attracting Millennial homebuyers - is an obvious choice for any investor looking to ride this wave. In fact, Birmingham ranked 7th out of 150 major metro areas for growth in the young professional population - young people with degrees are flocking to the Magic City.
It’s no wonder, given the fantastic university, the ample jobs growth, and the dirt-cheap cost of living. The thriving social scene, downtown renaissance, and affordable homes with steady appreciation don’t hurt either. In fact, Mainstreet.com recently placed Birmingham in their top ten cities for job-seeking graduates. More recently, Niche.com ranked a number of Birmingham’s suburbs among the best places in Alabama for Millennials, placed Jefferson County in the top 12% of best counties in the nation for Millennials, and named the Birmingham suburb of Brook Highlands in the top 1% of all suburbs in America for Millennials.
A Rising Star
Every investor dreams of finding that one great investment that no one else knows about yet - getting in before rising popularity pushes prices up. While Birmingham is still one of the most affordable cash flow markets in the country, this secret gem is getting noticed, and demand is soaring.
In addition to the fantastic housing prices, rock-bottom property tax rates, and impressive economic growth, Birmingham is a town for renters. In fact, the most recent data shows that more than 53% of Birmingham residents rent, making this the perfect market for long-term rental investments.
A report published by RealtyTrac once highlighted Birmingham as one of the best markets overlooked by institutional investors. The report, titled “Top 25 Hidden Gem Single Family Rental Markets”, focused on overlooked cities where the numbers all add up, but there is minimal competition from big-name investing firms. Birmingham has numbers that meet or beat those of many ‘hot’ real estate markets, but without the cut-throat competition for returns - for now.
In 2015, HousingWire.com listed Birmingham as the No. 1 outlier city, giving investors the highest return on investment properties. With press like that, however, Birmingham won’t remain an ‘outlier’ for long, and as investors flock to take advantage of this hidden gem, values will only go up.
- A $5.4 Billion interstate project called The Northern Beltline will complete a northern loop around Birmingham connecting the south part of the city to the north.
- Birmingham was selected to be the host city of the 2021 World Games, which will bring tourism and economic growth to the area.
- Alabama’s rivers connect over 15,000 miles of navigable waterways and provide over 80,000 jobs statewide.