RESEARCH TRIANGLE PARK – One prediction from a real estate expert reflects the growing consensus of economists and those in the housing industry about the big impact Apple’s new $1 billion campus along with other tech and life science projects will have.
Prices going up as home availability tightens.
“In an already stretched housing market, it will be stretched even more,” explained Nancy Harner, the relocation director for Coldwell Banker HPW, a real estate brokerage firm based in the Triangle. “We will definitely see a price increase in the market and home values to continue to rise.”
No doubt these projects such as Google’s new engineering hub in Durham and at the stated high salary targets, overall, it’s a huge win for the Triangle and speaks volumes to the talent that is already in the region, Harner said. Yet there is already limited housing availability, and she noted: “We will definitely see a price increase in the market and home values to continue to rise.”
The impact of Apple’s announcement on the region’s housing markets is expected to be similar to the effect of Amazon’s announcement that it would select the Crystal City and Arlington suburb of Washington, D.C. for one of two HQ2 locations So say George Ratiu, a senior economist for Realtor.com in a study published last week.
Apple, other development projects means higher rent prices, too, experts warn
“Technology companies are recognizing that the metro areas where they built their success upon have become unaffordable to many young professionals,” said Ratiu in an interview with WRAL TechWire. “In order to meet today’s tech talent, companies are expanding geographically with second headquarters and additional campus locations.”
Apple, Google and life science companies, like Invitae selected the Triangle for locations due to a high concentration of top-notch academic institutions, diversified economies, a high quality of life, and relative housing affordability, said Ratiu.
When Amazon announced HQ2 in the D.C. metropolitan area, the initial response of housing markets in the region was speculative, found Ratiu. That’s despite the fact Amazon had announced a 10-year time horizon for its move into the region. According to Ratiu’s research, the initial surge in prices in the region stabilized after two years, and a similar reaction might occur in the Raleigh and Durham real estate markets.
Apple, Google deals are ‘transformative’ but come with costs, says NCCU entrepreneurial leader McKoy
An analysis conducted by Nadia Evangelou, a senior economist at the National Association of Realtors, conducted last week at the request of WRAL TechWire, found that an estimate of 3,000–5,000 total direct and indirect jobs could be created in each of the first three years as Apple ramps up their facility to full employment.
On the other hand, real estate markets across the Triangle continue to sizzle, with inventory remaining low and demand steady. Evangelou’s analysis studied the market average for issued single-family permits across the past 20 years and found that to get to the historical average indicating a balanced housing market, 1,440 permits in Durham would need to be issued and 4,640 permits in Raleigh and Cary would need to be issued.
But — That’s before Apple, Google, Invitae, or other companies opening new facilities in the Triangle put additional pressure on the market.
Evangelou estimates an additional 1,500–2,500 building permits will need to be added to meet the increased demand, meaning the total new permits would need to be 7,600–8,600 across the Triangle, just to get to the historical average level of housing supply.
North Carolina continues to see population increase
Preliminary numbers shared by the U.S. Census Bureau found that North Carolina had a net population gain of 888,167 between the 2010 and 2020 Census, which shifted enough such that North Carolina is expected to receive one additional representative to the United States Congress.
“We obviously now have a huge imbalance in demand for housing versus supply of housing,” said Dr. Anne York, a professor of economics at Meredith College. “Maybe we are seeing a temporary imbalance due to the pandemic causing so many more people to want larger homes to accommodate working from home, but our area will also continue to see population growth from these companies relocating here.”
$1B Apple campus is good news for college students, job seekers, says Meredith professor
With recent economic development announcements from across the state, along with more and more companies moving to remote-based or hybrid-based work environments, there could continue to be an increase in interest in relocating to the state, whether that’s in the Triangle, the Charlotte metro area, western North Carolina, the Triad, or the coast. Across the state, real estate markets are hot, and some of the hottest markets are in places like Burlington, Jacksonville, Fayetteville, or Hendersonville, by some measures.
“The trends are tied to demographic, economic and consumer changes, many accelerated by the pandemic,” said Ratiu. “As remote work came of age in 2020, it freed many workers from their geographic confines, giving them the freedom to seek better quality of life and affordability.”
In a press release, Zillow shared that a surge in new listings may stabilize home price increases nationwide, as more and more homeowners are enticed to sell due to the increasing home prices, which nationwide rose 1.2 percent in March, the highest monthly jump in 25 years, according to the company. Another factor that may impact additional listings hitting the market is the increasing number of Americans who have received a COVID-19 vaccine, with the supposition being that sellers may be more comfortable listing their home for sale and conducting showings.
The Zillow data shows that in Raleigh, the year-over-year increase in home values is 11.2% and in Durham, it is 9.9%.
Is there a policy solution?
According to the data from Realtor.com that Ratiu analyzed, 34 percent of shoppers looking at homes in the Triangle were doing so from outside of the state, with the most views coming from high-density, high-cost cities, like New York, San Francisco, D.C., Los Angeles, and Boston. “Many are bringing along much higher purchasing power, both in terms of home equity and higher salaries,” said Ratiu, “in the short-term, this influx is leading to a sharp rise in home prices, which may stymie many long-time residents.”
Mike Aviles relocated his family from New York to the Triangle during the first year of the COVID-19 pandemic, and ended up selecting to navigate his family’s search using a product from the technology-enabled iBuyer Opendoor.
“We decided to leave New York and move to Raleigh to give my family a better quality of life,” Aviles is quoted as saying in a recent blog post from the company that highlights the most competitive zip codes in local housing markets across the country, including in the Triangle. According to Opendoor’s research, six of the ten hottest zip codes in the Triangle are 27603, 27604, 27609, 27610, 27703, 27713.
“Many of these zips are desirable due to a median sales price of less than $300K. Those homes are in the most demand and have the least supply,” said Opendoor general manager Jon Enberg. “Buyers at this price point range from first time homeowners to small investors to REITs and growing families.”
If Evangelou’s analysis is accurate, and Apple does in fact hire up to its stated 3,000 positions in the Triangle, will the area be able to add the estimated 7,600–8,600 additional housing units will be needed to stablize the housing market? The answer is not clear, as new construction in the Triangle is actually slowing, not increasing, due to supply-side challenges such as supply chain disruptions, increasing labor costs, and increased material costs, particularly lumber. When demand outpaces supply, prices will increase.
“The existing system likely will prove very responsive at accommodating the high-wage employees potentially linked directly to the Apple development, should it come to pass, and other high-wage employees in related industries,” said John Quinterno, a professor at Duke University’s School of Public Policy. “The system will not prove responsive to accommodating people in the mid-wage and low-wage ranges. These people may not even work in tech, but they likely will struggle with the increases in costs brought about by the subsidized project.”
Quinterno, who also founded and heads South by North Strategies Ltd., a research consultancy specializing in economic and social policy, has previously studied the regulatory changes that are meant to reduce barriers to supply. “Regulatory changes that supposedly reduce barriers to supply don’t do much at all to increase supply for mid-wage and low-wage households,” said Quinterno.
“This area in particular has been building rapidly for years, and meaningful progress hasn’t been made. The problem is that even when regulations are relaxed, there is little interest in building or accommodating households with more modest incomes,” he added.
Duke professor: Apple project may widen disparities in North Carolina
So while short-term spikes in housing costs are expected, given prior examples such as Amazon HQ2 in Washington, D.C., and the trends that have emerged during the global coronavirus pandemic, said Ratiu, in the long run, housing affordability is likely to depend on the actions of city leaders.
“We have seen over a decade of cities approaching population growth with zoning regulations from an entirely different era, ill-suited for today’s reality,” Ratiu said. “Over the long run, however, affordability will depend in large part to the actions of city leaders, who will have to face the positives of economic, population and real estate growth with a strategic mindset.
Quinterno recommends considering initiatives that would directly produce housing for a broader segment of the population, either through direct government action or partnerships with the nonprofit sector, but notes that local officials may not be able to tackle a problem of this scale on their own, and may need to seek financial support and statutory authorization from the legislature, along with federal resources.
Apple deal comes with clear winners – and clear losers – for Triangle, economists warn
