Birmingham, Alabama’s largest city, lost more than 50,000 jobs after the 2008 real-estate crash. Fifteen years ago, at least 30 publicly traded companies were headquartered there; now there are only 12. And Jefferson County, where Birmingham resides, filed for Chapter 9 bankruptcy protection in 2011, exiting in 2013. Now, Birmingham is making a comeback—which for luxury home buyers means the return of bidding wars, lengthy home searches and rising prices. Matthew Conroy, his wife, Alexee, and their children moved from Brooklyn, N.Y., to Birmingham in 2013 when he took a job as CFO of Momentum Telecom, a cloud-based communications provider. Initially the couple moved in with Mrs. Conroy’s parents for what they thought would be a couple months of house hunting. It wound up taking them a year. “A lot of people are just forcing through pocket deals,” Mr. Conroy said, referring to homes listed and sold privately or through word-of-mouth. “The number of friends that I have—executives—who are literally walking around putting notes on people’s doors and baking cookies for people. It’s craziness. There’s just not a lot of inventory.”
The Conroys’ first offers on three separate homes were all rejected in bidding wars. So when a charming 1940s cottage came on the market, meticulously renovated by a well-known interior designer, the couple made an offer above asking price the same day it was listed. “A lot of the homes we had seen hadn’t been renovated in 30 years, or were renovated piecemeal,” said Mr. Conroy. “This was a house that we could see ourselves in for a really long time. And it was in a style and had a level of artistry that we really loved.” They paid $869,900 for the three-bedroom, 2½-bathroom house, which is less than a quarter-mile from Mountain Brook Village, an upscale shopping area in the city of Mountain Brook, one of Greater Birmingham’s high-end municipalities. That the couple would be happy in a 2,460-square-foot home—significantly smaller than other homes they’d toured—surprised family and friends. But the Conroys weren’t alone in their sacrifice of quantity for quality square footage. “Younger buyers aren’t really interested in buying the biggest house their money can buy,” said Brian Boehm, an agent with RealtySouth. “They want economical living that’s not overblown.” This trend means many of Birmingham’s more formal estate homes, especially those listed at $2 million and up, are spending significantly more time on the market. John Cooney, founder and former CEO of what is now CRC Insurance Services, and his wife, Liz, were eager to downsize and travel now that their children are grown. They have had their historic 2-acre estate in Mountain Brook on and off the market since 2012. The home includes four bedrooms, 5½ bathrooms, sprawling English gardens and a guesthouse. It’s currently listed for $2.695 million, at least $1 million shy of what Mr. Cooney suspects he would have gotten at the market’s peak in the mid-2000s. “The days of ‘I’ve got to have a big showcase piece of property to take care of my family and tell everyone I’ve arrived...I think it’s less evident with kids now,’” said Mr. Cooney, who is 66. “They’re more frugal.” While downtown Birmingham’s luxury “rooftop residential” market—namely lofts and high-end condos—has been slow to take off, buyers’ increasing interest in work-life balance (read: short commutes) has helped the city’s perimeter neighborhoods—including the high-end and historic Forest Park, Redmont Park, Mountain Brook, and Homewood—claw back value since the pall of 2008. The average sale price for homes $800,000 and up in Birmingham was just over $1.1 million in 2015, compared with $1.2 million in 2007, according to the Greater Alabama Multiple Listing Service. That gap might be bigger if not for a decrease in inventory, with 450 listings in 2015 compared with 639 in 2007. “I’ve got far more buyers on hand than sellers right now,” said Mr. Boehm, the RealtySouth agent. “It’s not uncommon in this market to see multiple offers pushing a sale above list price.” That is especially true for renovated homes within walking distance of English Village, Crestline Village and Mountain Brook Village—popular areas with coffee shops, restaurants and luxury shopping, all a five- to 10-minute commute to the heart of downtown. “The trend of today is that everyone seems to want to be close in,” said Stephanie Robinson, an agent with RealtySouth. “They want to walk to coffee, walk to dinner. They also want to be able to move their clothes and their furniture in and be done. There’s only a certain amount of real estate that falls into that category.” Those willing to live farther out are likely to find better deals, allowing them the budget for a big renovation. Sid Evans moved his family of four from Charleston, S.C., to Birmingham in 2011, where he oversees editorial for three Time Inc. magazines. The house search took Mr. Evans, 46, and his wife, Susan, 43, over a year. “It was hard to find a good fit,” Mr. Evans said. “Part of that is because we were being picky, and part of it is because the good homes go quickly.” The couple lost out on one home after a bidding war. “It dawned on us that we were going to have to renovate to get what we wanted,” said Mr. Evans. “We weren’t finding that turnkey home.” They eventually settled on a 2,885-square-foot, 1950s farm-style home located on 3½ acres. They purchased the home for $690,000 and spent eight months renovating. They gutted the original home and added another 1,475 square feet that includes an open-concept kitchen/family room as well as a heated pool. “I never anticipated moving to Birmingham,” said Mrs. Evans, a former attorney who is a stay-at-home mom. “But in the four-plus years since we’ve been here, we’ve seen Birmingham evolve…It’s a rising city.” In the past two years, British-based Oxford Pharmaceuticals, as well as Steris, a global health-care company, and Evonik Industries, a specialty chemicals company, have all selected Birmingham for the development of new campuses, drawn by the infrastructure of UAB Hospital, the third-largest public hospital in the U.S. and Birmingham’s biggest employer. In 2015, developers spent $725 million on projects and planning in the city’s downtown, according to the Birmingham Business Alliance. Industrial mills, left empty as the city’s steel and iron industries have waned, as well as the once tony Pizitz department store, are being converted for office, retail and residential use. Approximately 2,000 new apartments are currently under construction, as well as downtown’s first full-scale grocery store and pharmacy since the 1960s, a Publix set to open in December. “The financial crisis of 2008 wreaked havoc on Birmingham. We went through a period of diminished wealth,” said Mr. Cooney. “The good news is you can’t kill Birmingham. The magic of the city is still alive.” This article originally appeared on The Wall Street Journal.