Should You Rent vs Buy in Birmingham, AL in 2023?
With its rich history, vibrant cultural scene, and warm Southern hospitality, Birmingham, Alabama is a great place to call home. Whether you’re moving to Birmingham or are a Birmingham resident, then you may be considering if you want to rent versus buy a home in the area. Even in today’s real estate market, there are pros and cons to consider if you’re renting or buying a home in Birmingham, making it that much harder to decide what fits your goals.
If you’re considering buying a home in Birmingham, it’s important to know the median sale price for a home is $255,000. The average rent for a 1-bedroom apartment in Birmingham is $1,060 and $1,300 for a 2-bedroom apartment. For many residents of Birmingham, this means it may cost less to rent a home than buy a home in today’s market. It’s important to know that there may be a variety of reasons why buying a home may be best for you this year.
At the end of the day, the decision between renting or buying a home in Birmingham is personal and depends on many factors. Whether that’s having flexibility in where you live or your financial goals, there are numerous factors that can help you make the decision. We’ll guide you along the way as you decide between renting vs buying in Birmingham. That way, you can determine the right option that best meets your goals.
Advantages of buying a home in Birmingham
One of the main advantages to buying a home in Birmingham is that home prices are affordable right now, especially compared to other markets. In 2022, the average home price was around $300,000 and today the median sale price is around $255,000. The area offers competitive salaries and relatively low living costs, too. Greater Birmingham consistently ranks among America’s most desirable places to work and earn a living. There are several factors that make Birmingham a favorable place for property investors too, such as its affordable home values, passive income potential, and overall market stability over the last few years.
Owning a home provides a unique opportunity to build equity over time. Equity represents the difference between the market value of your property and the remaining balance on your mortgage. As you make regular mortgage payments, a portion goes towards reducing the principal amount owed, effectively increasing your equity. Additionally, as property values typically appreciate over the long term, your home’s market value can increase, further bolstering your equity.
Stable monthly payments
One of the biggest advantages to buying a home in Birmingham with a fixed-rate mortgage is that you’ll have the same monthly mortgage payment throughout the duration of your mortgage. Although your other monthly expenses may vary, your mortgage payments will remain the same, providing you peace of mind and stability.
Disadvantages of buying a home in Birmingham
Lower supply of move-in ready homes
There are several areas around Birmingham where most of the homes are older and have not been well maintained or are distressed. So, if you’re looking for a new construction or move-in ready home, you won’t necessarily find what you’re looking for in every neighborhood of Birmingham.
With homeownership comes the added responsibility of maintaining your home and property. Regular maintenance duties, such as cleaning, landscaping, and minor repairs, help ensure the longevity and functionality of the home. Additionally, periodic inspections and maintenance of systems like HVAC, plumbing, and electrical are essential for their proper operation and to prevent potential issues. While some maintenance tasks can be handled through DIY efforts, others may require professional assistance, leading to additional costs.
Large upfront costs
Keep in mind that there are more costs associated with buying a home than just the down payment. When saving up to buy a home in Birmingham, you’ll need to factor in additional costs such as closing costs, home inspection fees, and appraisal fees. But by diligently planning, exploring available assistance programs, and relying on the expertise of your agent, you might find that your dream of becoming a homeowner can happen sooner than you initially thought.
Determining if you are ready to buy a house in Birmingham
Whether or not you’re ready to buy a home in Birmingham depends on a variety of factors. Below are some of the key factors for you to consider to decide if it’s a good time for you to buy a home:
- Financial stability: Before you begin your homebuying journey, it’s important to have a good credit score and a stable income. Make sure you set aside some additional funds for down payment, closing costs, and additional expenses that go into the homebuying process. You’ll also want to build an emergency fund in case of any unanticipated expenses.
- Housing market conditions: The housing market in Birmingham is somewhat competitive, so it’s important to know how much you can afford in today’s market.
- Long term commitment: Buying a home is a more significant time and financial investment, unlike renting. So, if you’re not sure you’ll be living in Birmingham for more than a few years, it may be better to continue renting vs buying a home.
- Personal goals: Finally, you’ll want to assess your priorities and discuss your personal goals before making the step into the homebuying process. Are you looking for a home with certain amenities – a pool, chef’s kitchen, indoor-outdoor living space? Do you want to be close to public transit or something further from the city? Determine what’s important to you during your home search and if buying a home meets those goals.
If you’re undecided on whether now is the right time to buy, consider speaking with a real estate agent or your financial advisor to understand your options.
Is it competitive to buy a home in Birmingham?
The Birmingham housing market is currently somewhat competitive. Some properties that are move-in ready and well maintained are still getting multiple offers, and this is where most of the competition is. On average, homes in Birmingham are selling within 41 days and for about 2% below list price.
Advantages of renting a home in Birmingham
One advantage of renting vs buying a home is that one can move or relocate relatively easier and faster than if they own a home. When a renter’s lease is up, they can easily pick up and move to another neighborhood or city, whereas homeowners may not have this luxury.
Another advantage is not having to pay for homeowners insurance, which can be costly. In comparison, renter’s insurance is very affordable. Renters also don’t have to account for potential HOA dues or maintenance costs, which are typically the landlord’s responsibility.
Lower upfront costs
When renting a home in Birmingham, there are two upfront costs to keep in mind: first month’s rent and a security deposit. Sometimes a landlord may require last month’s rent, but this can vary. In comparison to the upfront costs associated with buying a home, these tend to be much lower.
Disadvantages of renting a home in Birmingham
Rent prices have been steadily increasing at higher rates than interest rates in Birmingham. Depending on your rental agreement, your landlord could increase your monthly rent when it comes time to renew your lease.
Not building equity
Another very important disadvantage of renting vs buying to consider is that the individual is not gaining any equity when they’re paying rent rather than a mortgage. Renting requires making regular payments to the landlord, but these payments do not directly contribute to building equity or financial security; rather, they solely grant you the use of a living space without any long-term financial benefits.
Less freedom of the living space
Whether you’re renting an apartment or a home, your ability to personalize your living space is limited since you’re living in someone else’s space. For example, you might not have the ability to paint walls or cabinets, install new finishes, or make permanent improvements without the approval of your landlord. On the other hand, a homeowner has the freedom to make minor cosmetic changes or take on larger improvement projects.
Renting vs buying in Birmingham: A real estate agent’s final thoughts
In my opinion, it ‘s always a good time to buy in any market as long as you find the right property and are in the financial situation to do so.
Whether you choose to rent or buy, the Birmingham area is an amazing place to call home. If you’re just starting the homebuying process, make sure you’ve done a thorough look into your finances to understand what you can afford now and in the future. Be sure to estimate your mortgage payment with an online mortgage calculator and see what homes fit your budget with a home affordability calculator.