‘If we are in a recession, it’s hard to tell’: Raleigh’s market remains strong
Written by Brian Boucher
Reviewed by Mynd Editorial Staff
If Raleigh 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, even accounting for a slight cooling owing to rising mortgage interest rates.
As of June, the median home listing price was $432,455, up 20.1 percent year-over-year, per Realtor.com.
As of June, the median home sale price was $364,000, up 12 percent year-over-year, per Realtor.com.
June saw 716 homes sell, down 25.8 percent year-over-year, according to Redfin.
Homes are on the market an average of just 9 days, down from 12 a year prior, according to figures from the Raleigh Regional Association of Realtors (RRAR).
“If we are in a recession,” said realtor Tim McBrayer, RRAR’s current secretary/treasurer, “it’s hard to tell by what’s happening in this market. We still have many fewer homes than buyers and an average of 62 people moving into Wake County alone every day.
“So it’s hard to say that we’re suffering,” he added, “with so many people finding this to be a destination.”
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.
A favorable outlook for investors
With Raleigh ranking as the second-fastest-growing large metro area in the United States behind Austin, the forecast is, needless to say, favorable. The city grew 23 percent since the last U.S. Census a decade ago, and over two-thirds of that growth was in-migration.
“I constantly see news stories about tracts of land being bought by developers in all the counties surrounding Wake County,” said McBrayer.
“From a rental standpoint, there’s a lot of demand, from people looking to rent and those looking to invest,” said McBrayer. “I just showed a quadruplex three years ago at $340,000, and now it’s on the market for $625,000. Whether we’ll get that remains to be seen, but there are plenty of people looking.”
Another bonus for investors, points out Thomas Stepp, Mynd’s head of investor offerings, is the state’s legal landscape.
“In certain states, the protections lean in one way or the other, protecting property owners or residents,” 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.”
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’s R&D budget recently topped $1.2 billion, and NCSU is the third-largest recipient of industry sponsored research among public universities that don’t have a medical school. UNC Chapel Hill, not to be outdone, also recently topped the $1.2 billion mark in research funding, 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 plans to invest $1 billion in the state, including a new campus and engineering hub, its first on the East Coast, in Research Triangle Park. This will create jobs in AI, machine learning, software engineering and related fields.
To cultivate future talent, the company is creating a $100 million fund to support the state’s schools (already second in the nation for most equitable). It will also contribute $110 million in infrastructure spending on broadband, roads and bridges and schools in the state’s neediest communities.
Google has come to the area too, opening 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 #6 in the nation for life sciences. In fact, research undertaken here has been key in responding to the COVID-19 pandemic.
UNC, whose government research funding is 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, broke ground on a $550 million manufacturing facility in nearby Holly Springs, bringing more than 350 jobs with an average salary of $100,000.
A hopping culinary scene, with beaches nearby
All of these major draws are bound to continue to draw new people. Many of them will arrive via Raleigh-Durham International Airport, which was ranked #3 (up from #9 a year before) in J.D. Power’s 2021 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 eighth-safest in the country in a WalletHub study.
The magazine also points out that Raleigh’s culinary offerings are top notch.
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 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 singled 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 homebuilding prospects and #2 in overall real estate 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 magnet cities.
Besides all the universities and corporations, Raleigh has one more ace up its sleeve: it’s the state capital, which tends to provide stability to an ecosystem.
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.”
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.”
McBrayer, having lived in Raleigh for three decades, can easily tick off a list of things to love about the area.
The weather is pleasant; Raleigh is located between the mountains and the ocean; there’s great transportation infrastructure, with major highways nearby (but not running through downtown); and the city offers excellent health care.
On top of all of that, property taxes are low, he added. Clients of his moving in from expensive cities in the Northeast and out West pay half the property taxes on homes two or three times the size, he said.
“I’ve yet to have a client move here,” he said, “and not love it.”