If Raleigh, North Carolina had a report card showing the strength of its housing market, job prospects, quality of life, educational opportunities and amenities, it would be scoring straight As. The metaphor is fitting, because as the home of three top-flight universities with world-class research departments, the tri-city Raleigh-Durham-Chapel Hill area attracts major research & development funding and leaders in industries such as technology and life sciences. It all adds up to healthy salaries for a highly educated population.
That translates into a super-competitive housing market.
- As of August, the median home price was $351,000, up 15 percent year over year; the same figure in 2020 was up 10 percent on the year before that.
- Time on market has dropped in hot housing markets all over the U.S., but according to Zillow, houses in Raleigh are selling in an astonishing four days, second-fastest in the country.
- Prices remain relatively affordable, with the average home priced at $333,000, below the national average of $350,000.
- The cost of living is roughly on par with the national average, but property taxes are relatively low compared to other major cities.
(READ MORE FROM MYND: The 6 best places to invest in Raleigh)
Construction lags, but buyers commit
LendingTree lists Raleigh as the third-most-competitive in the U.S. due to the high percentage of home buyers who notch a credit score better than 700, place 20 percent down, and secure a mortgage before shopping for a home. What’s more, Zillow forecasts the price of an average home to jump far faster in the next year—by nearly 35 percent, putting the price tag at $490,000.
Every hot housing market has some anecdote showing just how hot it is (like the home in Austin that went for $850,000 over asking, even though it has no air conditioning). Brett Bushnell, a broker/owner/realtor at Tri Local Realty and 2021 president of the Raleigh Regional Association of Realtors (RRAR), has one, too.
“Our standard contract indicates a nonrefundable amount paid to seller at time of contract,” said Bushnell, who has 16 years of experience, including some time in mortgage lending. “It shows how committed the buyer is, because the bigger fee, the harder it is to walk away. We rolled out this contract in 2011 when it was very much a buyer’s market, and people put down maybe $100 or $500. Now you see $4,000, $10,000, even $50,000 in due diligence fees.”
As in many other markets, home construction has lagged since the Great Recession. “We’re just starting to hit what we need to build just for this year’s demand,” he says.
And the forecast is excellent for the housing market, including investment opportunities and promise of good returns on rental properties, even if the same runaway climbs don’t continue, he says.
“At some point we’re going to come off of this high rate of appreciation,” he says. “For the rate of appreciation to stay at 10 or 15 percent would be very difficult to maintain, but it looks good for continued growth for investors to build on.”
A favorable outlook for investors
With Raleigh ranking as the second-fastest-growing large metro area in the United States behind Austin, Bushnell’s favorable forecast is pretty much a lock. The city grew 23 percent since the last U.S. Census a decade ago, and over two-thirds of that growth was in-migration.
Bushnell is also an investor himself, so he brings a detailed knowledge of the rental market as well, where prices have been on the rise for five years, if not longer, he says.
“Even though we have a lot of multifamily construction, there’s a lot of higher-end product, and the market has been absorbing that very well. And you’ve seen very good rental increases on single family homes,” he says.
With people spending more time in their houses since the work-from-home revolution, apartment dwellers have been moving out of apartments and up to single family homes, so they at least have a bit of outdoor space, and homeowners have been trading up, fueled by rock-bottom interest rates.
Another bonus for investors, points out Mynd’s director of investor services Thomas Stepp, is the state’s landlord laws.
“In certain states, the protections lean in one way or the other,” says Stepp. “California, New York and Massachusetts are heavily tenant-centric, for example. Laws protecting tenants start well-intentioned, but in those states, it can take up to eight months to evict a tenant. In North Carolina you have a very fair and equitable balance.”
Government and tech jobs ensure the future
Home to North Carolina State University, Raleigh is one of the three cities, along with Durham (home to Duke University) and Chapel Hill (site of the University of North Carolina’s flagship campus) that make up the renowned Research Triangle, owing to these elite universities’ robust research programs.
Global real estate services company Savills recently ranked the Triangle the #8 site for science globally, based on factors like talent, universities, and funding environment, but also lifestyle. Research Triangle Park, founded in 1959 and the largest research center in the nation, is host to companies like Cisco Systems, IBM, and Fidelity Investments.
Duke allots over $950 billion annually to R&D, and NCSU is the third-largest recipient of industry sponsored research among public universities that don’t have a medical school. UNC Chapel Hill, meanwhile, has eclipsed the $800 million mark in research grants and contracts, and its schools of medicine, business, and law are among the country’s best.
Add it all up and you have a ridiculously well-schooled population in the region; Raleigh ranks as the second-best-educated city in the nation. “The students create a built-in rental market for investors throughout the area, too,” Stepp notes.
Growth in STEM jobs buoys market
Raleigh ranks second (behind Austin) in tech growth over the last decade, and the state capital is #1 in STEM job growth. Praxis Strategy Group’s stats show that over the last decade, tech-related jobs grew by more than 60 percent, to nearly 39,000; STEM jobs grew at a rate of 39 percent, to nearly 50,000.
Those research departments are drawing major companies to them, fast and furious.
Apple, for one, plans to invest $1 billion in the state, including a new campus and engineering hub in Research Triangle Park. This will create jobs in AI, machine learning, software engineering and related fields. In order to cultivate future talent, what’s more, the company is creating a $100 million fund to support the state’s schools (already second in the nation for most equitable), and, to keep things rolling smoothly along, will contribute $110 million in infrastructure spending on broadband, roads and bridges and schools, to the state’s neediest communities.
Google is coming to the area too, announcing in March that it will create a Durham hub that will create over 1,000 jobs, with engineers working on Google Cloud projects.
Commercial real estate services firm CBRE ranks Raleigh-Durham #5 in the nation for life sciences. In fact, research undertaken here has been key in responding to the COVID-19 pandemic. UNC, which receives more than $1 billion annually in government research funding (behind only the Centers for Disease Control and Prevention and the National Institutes of Health), partnered with Gilead Sciences to develop Remdesivir, the only effective drug in treating the disease.
Other biotech companies are also attracted to the existing infrastructure; Amgen, whose drugs treat conditions like low white blood cell counts, osteoporosis, and colorectal cancer, recently announced plans to erect a $550 million manufacturing facility in nearby Holly Springs, bringing more than 350 jobs.
A hopping culinary scene, with beaches nearby
All of these major draws are expected to bring 67,000 people to the area over the next five years, or 1.5 humans per hour. Many of them will arrive via Raleigh-Durham International Airport, which was ranked #9 in J.D. Power’s 2020 North American airport customer service satisfaction survey. A record 14.2 million passengers traveled through RDU in 2019.
Once they join a metro area population just shy of two million, they’ll have plenty of reason to feel comfortable exploring, since the City of Oaks (so called because of its many tree-lined streets) ranked ninth-safest in the country in a WalletHub study.
The magazine also points out that Raleigh’s culinary offerings come in very strong. They include Brewery Bhavana, which Condé Nast Traveler ranks among the world’s most beautiful breweries; Indian and Asian hot spot Garland, whose chef, Cheetie Kumar, was shortlisted for the coveted James Beard Award for best of the Southeast; and 2019 James Beard outstanding chef Ashley Christensen’s stable of restaurants (Poole’s Diner, Beasley’s Chicken + Honey, Death & Taxes), which “live up to the hype.”
Other amenities, Brett Bushnell points out, include proximity to sandy beaches along the coast for when it gets too hot in the summer (daytime highs regularly hit 90 degrees), as well as to the Blue Ridge Mountains, which offer opportunities for winter skiing, hiking, rafting, and camping.
More indoorsy types enjoy cultural facilities like the Durham Performing Arts Center, the North Carolina Museum of Art, the Contemporary Art Museum Raleigh and the North Carolina Symphony.
Plenty of people are coming to the region to visit, even if not to live. When international travel was hobbled by the pandemic, Vogue pointed out that Durham was among the top five destinations where Americans were traveling domestically, and singles out Raleigh’s “quaint yet buzzy” boutique hotel Guest House.
Some stay longer than just a vacation. Rocket Homes and Sperling’s Best Places called Raleigh the country’s sixth-best place to work remotely, based on factors like median home value, amenities, and broadband access. In fact, Verizon Ultra Wideband service, the fastest 5G network in the world according to the communications giant, launched in parts of the city in 2020.
No sign of growth slowing soon
Raleigh’s real estate market is forecast to only go from strength to strength. Raleigh-Durham ranked #1 in terms of overall real estate prospects and homebuilding prospects in consulting firm PwC and Urban Land Institute’s 2021 report “Emerging Trends in Real Estate,” based on surveys and interviews with more than 1,600 property owners, real estate firms, banks, and other stakeholders. The report called it one of America’s boomtowns, attracting smart young workers and recovering well from pandemic-related job losses. Multifamily properties got a 72% “buy” rating and a 20% “hold” evaluation.
Besides all the universities and corporations, Raleigh has one more ace up its sleeve: it’s the state capital. When realtor.com assessed the hottest markets for 2021, it pointed out that tech hubs and state capitals tend to lead the pack, because state governments provide stability to an ecosystem. Raleigh is both.
All these high-paying tech and STEM jobs, in Raleigh as elsewhere, tend to create an environment where lower-paid workers have a hard time making the rent. But if anything, Raleigh may soon become more livable for more types of people, not just the well-paid researchers at the Triangle.
The city’s strategic plan includes a drive to promote the construction of new housing, including affordable stock, and allow for more diverse housing types, including accessory dwelling units, creating more opportunities for investors. Especially near new transit infrastructure, the city hopes to promote walkable neighborhoods, and, on the environmental side, to invest in electric vehicle charging stations.
“The city is densifying the center,” said Stepp, “making it a hipper place to live.”
Bushnell agrees, saying that the state government is eyeing eliminating the single family zoning that makes it impossible to build denser housing.
All this will lead to more and more neighborhoods with promising returns.
“Anything that is close to Research Triangle Park, the core of the metro system, or any of the downtowns” is dependable, Stepp said. “Some have gone out further because they can get better rates of return, and even those neighborhoods have shown good demand.”
As for the potential upside, says Bushnell, “There’s a ton.”