In the face of rising interest rates and falling inventory, the Triangle’s housing market is slowing down.
The exception: single-family, one-bedroom or less properties, which jumped by 6.1%.
“Certain segments of the Triangle housing market are charting a unique course,” said Matt Fowler, TMLS’ executive director, when the group released the market report at its inaugural PropTech South at The Friday Conference Center in Chapel Hill last Thursday.
He added this bag of “mixed trends” could indicate a shift toward a more balanced market — or even a “buyer’s market,” where buyers have more negotiating power.
Home prices may stabilize or slow down after two-plus years of soaring prices, he said.
The event aimed to highlight the latest emerging technologies reshaping the Triangle real estate landscape. It also served as a launchpad for the group’s new strategic two-year partnership with UNC Kenan-Flagler Business School’s Leonard W. Wood Center for Real Estate Studies.
The mission, they said, is to provide the public with “reliable data-driven” insights on local real estate trends such as supply and demand, inventory and housing affordability.
A panel of experts — including UNC finance professor Jim Spaeth — kicked off the collaboration. Tracking the latest trends, they presented a few predictions for the Triangle’s fall housing market.
Here’s their take:
High interest rates will continue to impact affordability.
Despite house prices down from their peak in 2022 — when the median price hit $422,000 — today’s higher interest rates are worsening housing affordability, said Eric Maribojoc, a UNC professor who focuses on affordable housing.
Short supply is also aggravating the situation, Maribojoc said.
In August, the median sale price in the Triangle stood at $416,000. That’s down 1% year-over-year. However, with current rates, the TMLS’ housing affordability index dropped 11.3% year-over-year.
The Triangle’s median household income was only 71% of what is necessary to qualify for the median priced home.
Maribojoc stressed that a lack of affordable housing contributes to homelessness, reduced access to health care and a range of other social ills. “Trying to find out how we can increase our housing supply is important to avoid those long-term consequences.”
Home prices likely to rise modestly.
Home prices in the Triangle remain near their peak, despite less inventory, longer time of the market, fewer showings and smaller overall number of sales.
The market’s resiliency is due, in part, to demographic changes, said Roberto Quercia, a professor in the school’s department of city and regional planning.
Raleigh was listed as the nation’s top in-migration destination in a 2022 North American Van Lines report, he said.
Much of this migration consists of college-educated workers moving to the Triangle for tech and other high-paying jobs. “That’s kept the floor in terms of prices and demand,” Quercia said.
Strong demand among older homeowners is also keeping prices high. “It’s likely that prices will either continue to go up or stay, but not decline.”
Resale market will remain challenging. New buyers will continue to rely on new construction.
The resale market has been challenging due to low supply, Quercia said. Current owners with low-interest mortgages are locked into their lower payments.
New listings are down 25.2%, TMLS found.
As a result, new buyers are increasingly served by new construction, he said.
According to the National Association of Home Builders, nearly a third of all homes for sale nationally in July 2023 were new construction.
Historically, new homes have made up only 10% to 15% of the market.
Robust construction of apartments and single-family homes will continue.
The region is undergoing a construction boom, Quercia said.
Some 10,922 apartments are on track to be built in the Raleigh-Cary metro area by year’s end — hitting a six-year peak and surpassing large hubs like Seattle and San Francisco, a RentCafe study found.
Despite the historic construction boom and the projections for 2023, headwinds remain. Among them: the rising costs of construction materials, labor and land, and the tightening of bank lending standards, he said.
“We see a challenge to that going forward.”
Share of investor purchases will continue to slow due to limited supply.
Citing a recent Redfin study, Quercia said the share of homes purchased by investors is down to 16% after hitting an all-time high of 20% in the first quarter of 2022.
The drop in investor purchases outpaced the 31% decline in overall home sales.
Investors are also making up a smaller share of home sellers, with 8% of the new listings owned by investors, down from a peak of 13% at the end of 2021.
Corporate investors typically gravitate to middle-market or older homes. “Those homes are few and far between compared to two years ago,” he said.
Owners of existing homes will continue to benefit from equity gains.
Higher house prices have made homeowners property rich, Quercia said.
Home equity gains remain at record highs in the U.S. — roughly $30 trillion, according to the St. Louis Federal Reserve, just shy of the 2022 peak.
That’s roughly $200,000 cash per homeowner in equity that can be tapped, he said. “Expect equity gains to continue.”
New development will concentrate in areas with more affordable land prices.
As land values rise, it’s getting pricier and more exclusive to build in the Triangle.
Instead, developers are increasingly gravitating to the Triangle’s fastest-growing outer suburbs, he said.
Among the “places to watch”: Wendell, which grew by 16% in 2022 to an estimated 11,570 residents, making it the fastest-growing town in not only the Triangle but in all of North Carolina, according to new estimates from the U.S. Census Bureau.
Wendell’s eastern neighbor, Zebulon, wasn’t far behind. Zebulon grew nearly 13% during that year, to 7,974, making it the state’s second fastest growing.
“It offers the cheapest land within commuting distance of job centers,” Quercia said.
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