Imagine if you had the foresight 7 years ago to invest heavily in Las Vegas, Phoenix, Miami and Honolulu, and to get out 2 years ago. Each of those markets appreciated over 100% in a 5 year period. Many savvy investors made enough money in those markets in just 5 years that they never have to work again. Now, instead of waking up with that 7 am alarm clock, many of them softly awaken by the warm breeze off the ocean blowing through their open window.
Mobile, Alabama (pronounced ‘moe beel’) is a city located in southwest Alabama at the mouth of the Mobile River. Spanning about 38 miles on the north shore of Mobile Bay, it was the city held by the French, British, and Spanish until it was seized by U.S. forces in 1813.
Today, Mobile, Alabama is one of the country’s hottest growth markets. Any real estate investor looking for a market with a solid economic foundation and strong appreciation potential will find it here.
According to a new research forecast by Moody’s Economy.com, Mobile County will have the fastest growing economy over the next five years among all 363 American metropolitan areas, growing over 34% from 2007 through 2012.
Three major contributors to this massive growth are the $3.7 billion ThyssenKrupp AG steel mill, Austal USA’s continued growth in shipbuilding, and the recently announced Northrop Grumman/EADS airplane assembly plants. Additionally, the State’s docks are undergoing the largest expansion in its history by expanding its container processing and storage facility and increasing container storage at the docks by over 1,000%.
Alabama currently ranks 2nd in the nation behind Detroit in automobile output, but with recent expansions the state will surpass Detroit in early 2009 and become the largest builder of automobiles in North America.
Don Epley, a business professor from the University of South Alabama, who projects local economic growth as part of his focus on real estate markets, has projected that Mobile County will grow between 5.5% and 6% in 2008. He cautions that it’s difficult to see too far into the future with external factors like energy prices dragging down local economies. However, he said that sustained growth of 6% a year is possible with the industrial expansions in the area.
The residential real estate market is booming. In 2007, Mobile was ranked by CNN.com as the “Seventh Fastest-Growing Housing Marketing in the Country.” Homes in the Mobile Bay area have appreciated between 5% and 8% annually over the last 5 years.
Mobile appreciated at an average of 6.6% over the past three years, except for the period after Hurricane Katrina in August 2005 when the appreciation rate hit 18% to 20%, according to Don Epley.
In the first quarter of 2008 Mobile had a 1.63% increase in home values. House prices are up over 6.7% over the last year, making the city one of the nation’s top 10 metropolitan areas in terms of price appreciation according to the Office of Federal Housing Enterprise Oversight (OFHEO).
As of April 2008 the housing inventory in Mobile was 8.5 months worth of homes — a healthy supply for a growing market. The housing inventory represents the number of months it would take to deplete the homes for sale given the current sales activity. Additionally, the average days-on-market (DOM) for existing homes sales in April was 82 days, a 17% increase over the same month last year.
As a point of interest, foreclosure filings across Alabama fell nearly 20% in March over the previous year, bucking the national trend and suggesting more borrowers are paying their mortgages on time.
Employment is a critical factor to the short and long term stability and growth of any real estate market. According to Business 2.0 and CNN’s Money Magazine, “Mobile is emerging as the South’s next boomtown and a magnet for megaprojects”.
Mobile’s total non-farm employment has increased steadily over the last three years. 2005 recorded a 3.2% increase followed by another 2.2% and 2.0% increase each year thereafter. Job growth in 2008 is expected to reach 2.57% with an additional 27% growth predicted over the next ten years. Nationally, job growth is expected to reach 1.4% this year and 11.9% over the next decade.
The total labor force increased steadily from 176,275 in 2004 to 184,696 in 2007 — an increase of 8,421 workers (or 4.6%). This trend appears to have the momentum to continue for several more years — a good economic signal when looking for a market to invest in.
Tourism is set to skyrocket with a $600 million NASCAR race track and entertainment complex (www.AlabamaMotorSportsPark.com) breaking ground this year. The “Dale Earnhardt Jr. Speedway” will be fully operational by 2010 and will also increase employment and spin-off jobs.
Mobile’s unemployment rate as of April 2008 was a mere 3.5%, similar to its 2007 unemployment rate of 3.58% and 3.64% in 2006. Alabama tied Kansas for the 17th lowest unemployment rate in the nation. Nationally, the average unemployment rate was 4.8% as of April 2008.
Unlike the stock market, local real estate markets usually move in slow, predictable cycles. Appreciation is not luck or magic, it correlates closely with economic development and population growth in a local area.
So, if you missed out on Las Vegas, Phoenix, and Miami (or if you rode those waves and know what it’s all about), you have another opportunity to invest in Mobile, Alabama, ranked by Moody’s and Forbes as the #1 market in the country for economic growth between 2008-2012.
(See an example of an investment opportunity in Mobile, Alabama on the Norada Real Estate Investments website )