TUSCALOOSA — For the second consecutive month average rent is on the rise in North Alabama and statewide, according to new data from the Waller, Weeks and Johnson rental index.
According to the index, the statewide average rent in April was $1,376, a 1% increase since March and a 5% increase year-over-year, the Alabama Center for Real Estate reported today.
For three major cities across the Tennessee Valley, the numbers are similar.
Decatur had the highest increase, followed by Florence and then Huntsville.
The average rental in the River City was $1,175.48 per month in April; an increase of 1.86% over March and 7.8% from March 2023. The report said a tenant would need to make at least $47,019 per year to not be rent burdened. According to the report, the average rent should be $1,046.79 per month.
In Florence, the average rent was $1,126.49 per month; 1.67% higher than March and 7.97% than March 2023. The average rent should be $1,020.41, the report said. The minimum annual income to not be rent burdened is $45,060.
Huntsville has the highest average rent in the area at $1,488.07 per month. However, the report said the average should be $1,515.40 per month. The rent average is just 0.35% over March and 0.47% over March 2023. To avoid being rent burdened, Huntsville tenants need a minimum annual income of $59,523.
The statewide rents are 5% more expensive on average than the index’s predicted rent rate, ACRE said. The predicted rent rate uses Zillow’s Observed Rental Index data to determine existing rents and statistically model historical trends from 2014.
“Affording a home is becoming increasingly difficult, and as a result rental demand continues to increase driving up rents,” Dr. Bennie Waller, the William Cary Hulsey Faculty Fellow in the University of Alabama Culverhouse College of Business and a research associate in the Alabama Center for Real Estate said.
Waller and fellow researchers Dr. Ken H. Johnson, an economist in Florida Atlantic University’s College of Business, and Dr. Shelton Weeks, the Lucas Professor of Real Estate at Florida Gulf Coast, added the rent-burdened metric to their monthly analysis of the most overvalued U.S. rental markets.
According to the U.S. Department of Housing and Urban Development, residents are considered rent-burdened if they “pay more than 30% of their income for housing including utilities.”
In Alabama, residents will need to make an average of $55,055 to avoid being considered rent-burdened, a $1,000 increase from last month. Compared to the rest of the country, Alabamians save more than $24,000 as the affordability rate was $79,889 in April.
Federal Reserve Chair Jerome Powell said rents were decreasing in April’s Consumer Price Index report. While he said he was confident in the decline during his press conference, he’s “not so confident in the timing of it.”
According to Waller, the longer the Fed opts to delay cutting rates, it may continue to drive up rent prices.
“Potential homebuyers are in a predicament, as higher interest rates mean higher monthly payments, forcing many to remain renters,” he said.
Complete interactive data for the U.S. and Alabama can be found on the ACRE Website.
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