RESEARCH TRIANGLE PARK – Home prices across the Triangle are surging, and that means fewer and fewer people can afford to buy them, according to new data from real estate research firm ATTOM. Looking ahead, the situation will worsen for buyers while improving for sellers should either the new Apple campus or Amazon HQ2 be built in the region, warns an ATTOM executive.

“Orange and Durham counties both posted double-digit home price appreciation in Q3 2018 compared to a year ago, which tells me that despite rising mortgage rates there is enough demand for housing relative to supply to keep pushing home prices up at a rapid rate,” says ATTOM Senior Vice President Daren Blomquist. Prices were up in Wake, too, at 7 percent.

And if Amazon or Apple – or both – come to the region?

“The influx of jobs, many of them well-paying jobs, that an Amazon or Apple would bring would only accelerate this price appreciation and make homes even less affordable for average wage earners in the region,” Blomquist says.

A housing assessment from the National Association of REALTORS reached a similar conclusion when examining the housing markets in 20 metro areas that are finalists for the HQ2 project. It warned the impact on Raleigh would be “dramatic.” And the capital area housing market already is tight despite rising prices with sellers getting on average 98 percent or more of their asking prices, according to the Triangle Multiple Listing Service.

Housing costs have been touted by Triangle backers and in several studies as a factor that could lead to HQ2 and/or Apple expanding in the region. But the prices are sizzling. Home prices already have surged on average more than $80,000 since 2012 as the most recent recession came to a close and housing prices bottomed out, according to ATTOM data.

Study: HQ2 would have ‘most dramatic impact’ on Raleigh housing prices among finalists

Making the situation more difficult for buyers is the continuing rise in interest rates. According to Charlotte-based LendingTree, 30-year mortgages are up to more than 4.3 percent. And as the national economy continues to roar at a Gross Domestic Product rate at more than 3 percent, the Federal Reserve continues to raise rates which in turn affect charges for mortgages.

As prices and mortgage rates climb, home buyers are having to devote a greater percentage of their income to finance their part of the American dream. For average wage earners, that means they are being priced out of the market, according to the latest “Affordability Index” ATTOM published Thursday.

Durham an exception – for now

Only in Durham County can a worker with an average income of $67,600 get a mortgage in a market where $66,365 is needed to buy a house where available homes average $227,00 in price, ATTOM reports. But with prices having climbed 10 percent and income increasing an average of 2 percent over the past year, even Durham’s hopeful buyers face the prospect of falling behind the affordability curve.

Average wage earners are already behind in the housing/wage battle.

Wake County wage earners need $77,310 to buy a home where the average selling price is $272,500, according to ATTOM. Yet the average wage is $56,511.

The situation is even worse in Orange County where the average home price is $333,000 and a $98,971 income is needed to finance it. The average wage comes in at $55,016, ATTOM reports.

“Already in Q3 2018 we show all three counties with an affordability index well below 100, meaning homes are less affordable than they have been historically,” Blomquist points out.

The Affordability Index includes home prices, incomes, the amount of income needed to meet mortgage requirements, and the rise or lowering of home prices and wages.

Post-recession boom

Homes in the Triangle were most affordable in recent years following the banking crises in 2008 and the ensuing recession.

Historically, Wake wage earners needed to utilize 33.7 percent of wages to pay for a home. But that figure has surged to 38.3 percent from 27.1 percent in the first quarter of 2013.

The average home price then: $181,000.

In Orange County, 50.4 percent of income is needed now to buy a home vs. a historical average of 46.1 percent. The most recent low was the first quarter of 2013 when the percentage fell to 37.5 percent.

The average home price then: $242,000.

A similar story line holds true in Durham County. Today, 27.5 percent of income is needed to buy a house vs. the historical average of 22.1 percent. In the first quarter of 2012, only 16.6 percent of income was needed.

The average home price then: $140,594.

Will interest rates cool demand?

The rising costs of loans could slow prices, Blomquist says, but not much – and not here,

“Rising mortgage rates do appear to be cooling off the market a bit nationwide and in certain areas. We are seeing home price appreciation slow a bit nationwide and in many local markets; however, that is not the case in the Research Triangle area where home price appreciation in the third quarter accelerated in Orange and Durham counties, and held steady in Wake County compared to a year ago,” he explains.

Asked about what factors are driving the housing market in the Triangle, Blomquist cites multiple factors.’

“Population growth is a big factor; all three counties saw positive net migration in 2017 according to the Census numbers we attached to our data.,” he explains.

“Additionally, job growth is driving the increase in home prices.

“Lastly we see that the Research Triangle has become very attractive to outside real estate investors coming in and purchasing single family homes as rentals. These investors are often not as constrained by affordability as owner-occupants, and they are buying for cash flow from the rents, which is a different calculus than owner-occupants. This means these investors are often willing to pay a higher price point than owner-occupants.”

In fact, he says, the market has become so hot that so-called flipping – buying and quickly reselling homes – is under price pressure.

“I have talked to real estate investors operating in the Research Triangle, and they have commented that the housing market is getting so hot there that even they are being priced out,” Blomquist says.

“One I talked to who used to flip properties has now ventured into building homes because the home flipping margins had gotten so thin.”