RALEIGH – If you’re looking to buy a house in Raleigh, right now might not be such a great time, depending on how you plan to purchase it.
That’s according to Ken H. Johnson, a real estate economist, and one of the researchers that found Raleigh’s housing market to be among the top 15 housing markets in the nation where average home values are now more than 50% higher than statistical expectations.
“Right now, my worry, if I were looking in Raleigh and looking to buy, is that I would be buying at the peak of the housing cycle,” said Johnson.
The newly updated analysis from researchers at Florida Atlantic University and Florida International University found that while average home values in the Raleigh metropolitan area are now roughly $445,200, the statistical model based on long-term pricing trends estimates expected home values in the region to be about $293,500.
The currently estimated home values are 51.7% higher than the expected value, according to the analysis, which is a difference of approximately $151,700.
Still, not everyone agrees that homes are overvalued—one local real estate agent told WRAL News this week that we might see home prices double within five to ten years. And even Johnson told WRAL TechWire that the region’s strengths—an expanding economy and job market, relative affordability compared to other regions of the country, and a growing population—may mean that even if there is an economic slowdown, housing prices won’t crash.
Triangle homebuyers face uphill climb made tougher by rising prices, mortgage rates, low supply
Agents remain unconcerned
Still, despite the region appearing ranked 14th on the list of America’s most overvalued housing markets, many real estate agents in the Triangle don’t expect to see price drops any time soon.
“Demand in the Triangle is still far outpacing supply,” said Jim Allen, a licensed real estate agent who is the broker-in-charge of the Jim Allen Group. “Prices are continuing to rise and we are still experiencing multiple offers on all resale listings,” he noted.
“Homes are definitely not over priced we are still experiencing bidding wars on all resale listings,” said Allen, adding that one home he listed last week came on the market for $1.5 million and went under contract for $1.8 million following a 24-hour bidding war.
That’s just one of hundreds of examples of similar transactions that have occurred this year, as homebuyers should still expect to face a bidding war, no matter the geography or listing price, said Allen.
“No, Raleigh real estate is not overpriced,” said Allen. “Prices will continue to rise for the foreseeable future.”
Prepare for a bidding war: Most Triangle home sales top list price, some by $100K+
It’s the economy
The Triangle’s housing market is booming because the regional economy is still growing, whether that’s an increasing number of new businesses, or the relocation or expansion of existing businesses across the Triangle and across the state.
With job growth and population growth come an increasing demand for shelter, and because the state faces a significant housing shortage—one executive estimated a shortage of 900,000 housing units by 2030—prices have increased across the market and across the region.
That includes the rental market, where Raleigh area rents are up nearly 20% year-over-year despite an estimated 5,000 rental units coming available during that time.
“Overvalued is an interesting descriptive for an appreciating asset,” said Linda Craft, a licensed real estate agent and broker-in-charge of Linda Craft & Team, REALTORS®.
“Gas is overvalued too at 50% increase and you only get to use it one time,” said Craft. “House prices have doubled in most Triangle areas and so have gas prices.”
Across the U.S., consumer prices have increased, driven by costs of shelter, energy, and food, and the latest inflation figure is 8.6% according to data released earlier today by the U.S. Bureau of Labor Statistics.
Triangle’s apartment crunch worsens – vacancy down, and price of rent jumps 20%
“Our area is in such high demand,” said Craft. “I do not believe houses are going to depreciate. This is the new norm.”
Announcements from companies like Google, Apple, Amazon, and now Meta, as well as the future jobs these firms expect to create, will contribute to driving up home values, said Craft. And as it’s not just these four companies that have chosen the state for expansion—a spokesperson for the North Carolina Department of Commerce told WRAL TechWire this week that more than 18,000 jobs have been announced, along with $7.9 billion in investment, in just the first five months of the calendar year.
“Our local economy is booming, and more job creation will lead to a continued high demand in all sectors,” said Allen. “The new jobs in the Triangle are bringing much higher salaries,” noted Allen, adding that because there are only about 3,000 homes currently available in the region but an estimated 32,000 high-paying technology and life science jobs expected to be added to the regional economy over the next decade, “this will produce sharp increases in prices for the foreseeable future.”
Meta coming to Durham: Real estate prices could double again in 5-10 years
Buy now, or not to buy
And last month, John Connaughton, an economist at the University of North Carolina at Charlotte, encouraged anyone interested in buying a home in North Carolina to buy sooner rather than later, especially if using mortgage financing to purchase the property.
That’s because mortgage rates are going up, all while the mortgage industry is seeing a significant reduction in applications for financing as the Federal Reserve seeks to stabilize the U.S. economy by raising interest rates and the costs of borrowing.
It’s not just the Triangle where homes are overvalued. Charlotte ranked 11th for overvalued housing markets, in the analysis, with an expected value of about $239,800 while current average home value estimates are approximately $372,300 in the metropolitan statistical area. That’s a price premium of 55.25% and a difference of $132,500, according to the analysis.
Layoffs hitting mortgage industry – including 48 more workers in Charlotte – here’s why
It’s not that homeowners should expect a housing crash akin to the one that preceded the Great Recession, said Johnson.
“I don’t expect a housing crash,” said Johnson. “You’ve got so many people coming to the region.” He cited a source that estimated that for every four people currently living in the Triangle, there would be five people living in the region within ten years.
That’s a growth rate of 25%. And, because inventory is low right now, and so many people are choosing to move to the region from other areas where home values may be even higher than Raleigh, said Johnson, we’re in a different economic environment than we were in during 2007.
Addressing the challenges of the Triangle’s housing markets
Still, prices are softening, a bit. An analysis of Triangle Multiple Listing Service data obtained by WRAL TechWire found that the median sale price in Wake County during May 2022 was $485,000—the same median sale price observed in the market during April 2022.
Still, homes averaged just four days on the market in May 2022, compared to six days on market in May 2021, when the median sale price in Wake County was $389,900.
And in Durham County, the median sale price in May 2022 was $424,250. That’s down from the median sale price of $426,000 across all transactions in the county that closed during April 2022.
“Could be a softening of prices, and a long term trend of a lack of affordable housing,” said Johnson. “You can’t get this far above a fundamental pricing trend,” he said. “And you can’t get out of this without some economic pain, and rather than see a crash like last time, you’ll see a long term lack of affordable housing.”
Thinking about buying a house? Do it now as costs keep soaring, economist says
Read the full article here