RALEIGH – If you are looking for a new house or aplace to rent, prepare yourself for a price shock.

Whether renting or seeking to purchase, Triangle residents are facing rapidly increasing real estate prices, with the median Triangle area home sale price increasing 10% in recent months. Rental rates in Raleigh jumped 6.8% compared to a year ago, according to new data. And that surge came long before new tech jobs promised for the region by Apple, Google and several other firms began to arrive.

Across the Triangle, the median sales price of a home reached $329,900 in April 2021, a 13.8% increase from April 2020, when the median home price was $290,000, according to data from the Triangle MLS. And, the average sales price for a home sold in April 2021 was $381,705, up 15.1% from April 2020.

The Triangle is likely to see a continued increase in home prices, Nancy Harner, the relocation director for Coldwell Banker HPW, a brokerage firm based in the Triangle, told WRAL TechWire last month.

That’s due to the recently announced economic development projects, including Apple, Google, Invitae, and Fuijifilm Diosynth, among others. These are bringing or creating thousands of high-paying jobs in the Triangle in the coming years, said Harner.

“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.”

Rental rates across the Triangle are rising, as well.

Compared to April 2020, rental rates for one-bedroom housing increased by 29.9% by April 2021, according to data shared exclusively with WRAL TechWire by Zumper data journalist Jeff Andrews.

For two-bedroom housing stock, rental rates increased by 15.4% in that same time frame, and have already increased again in May, according to Zumper data.

In Raleigh, Zillow data found that across the rental market, rates rose 6.8%.  Zumper’s data set reveals that one-bedroom housing increased 4 percent whereas two bedroom housing increased by 8.3% year-over-year.

Factors contributing to the increasing home prices and rental rates

Interest rates remaining relatively flat: The average rate on a 30-year mortgage was 3.31% in April 2020, compared to an average rate of 3.06% in April 2021, according to the primary mortgage market survey data analyzed by FreddieMac.

One key factor that may be contributing to soaring home prices is the supply of available homes, known in the real estate industry as inventory.

Nationally, the average mortgage purchase application size recently hit $411,400, though U.S. applications for mortgages for home purchases fell to a three-month low, Reuters reported Wednesday. That news may signal further headwinds for home sales in the months ahead.

“Despite still relatively low rates, scarce inventory and soaring home prices are eroding affordability and putting homebuying out of reach for many households,” said Lydia Boussour, lead economist at Oxford Economics in New York, told Reuters.

Further, the average number of days on market prior to sale has dropped to 14 days in April compared to 26 days in April 2020, according to Triangle MLS data.

In the Triangle, inventory is low, down 66.5% from last April, when much of the real estate market was paused, like many industries, in response to the uncertainty of the spread of the global coronavirus pandemic.  In April 2020, there were 7,892 homes for sale.  In 2021, there were 2,646, despite predictions from some economists that more inventory would ht the open market in April.

One such prediction was made by Zillow in April, as it analyzed responses to a survey, noting the results showed it reasonable to anticipate additional inventory coming on the market. But the most recent market data has revealed that this did not occur, or at least not yet.  Zillow is now predicting a continued increase in home appreciation, as well as a corresponding increase in rental rates, estimating appreciation nationally to be 11.8%over the next 12 months.

Some worry that a housing market bubble is forming.  But Zillow doesn’t think so.

Feeling the squeeze in NC’s scorching real estate markets

When home prices appreciate quickly, in a relatively short period of time, the concern of bubble formation is to be expected, said Jeff Tucker, a senior economist with the Zillow Group.  Partially, that’s because memory of the growth during the years between 2004 and 2006 are particularly salient in the minds of homeowners, and for the millennials whose parents experienced the run up of prices, followed by the subprime mortgage crash and then the Great Recession.

“Both of these hot markets saw extreme price appreciation in a relatively short period of time. But that’s where the similarities end,” said Tucker.

What’s happening now, based on the data from multiple listing services, and the proprietary data from Zillow, appears to be different.

Homebuyer demand is increasing, whereas inventory of homes for sale remains relatively flat, and new construction is slowing due to labor supply, increasing cost of materials, and lack of zoned, permitted lots entering the market.

Strong fundamentals, “with long legs,” said Tucker, currently underpin the housing market.

It’s economics, on display in local housing markets: when supply is low, and demand is increasing, prices tend to increase.

Housing pain: Apple, Google, other projects will ‘stretch’ already tight Triangle markets, experts say

Housing costs are rising elsewhere in North Carolina, too.

Charlotte market sees 14.5 percent price appreciation

In the greater Charlotte metropolitan area, which includes twelve North Carolina counties and four South Carolina counties, the median sales price has increased from $275,000 to $315,000, a 14.5% increase year-over-year, and the average sale price in April 2021 was $377,643, according to data from Canopy MLS.

Similar to the Triangle, inventory is down nearly two-thirds compared to April 2020.  Last year, there were 9,099 homes in inventory, whereas in 2021, there were 3,018.  The months of supply of inventory, like in the Triangle, is 0.6 months.

In Mecklenburg County, the data shows a similar story.  The median sales price has increased 12& year-over-year, rising from $305,000 in April 2020 to $343,325 in April 2021, with inventory down 62% in April 2021 compared to the prior year, and a 0.6 months supply of inventory.

Renters in NC still feeling the squeeze

In the rental markets, Charlotte has seen an increase of 7%year-over-year, on average, with rents increasing to $1,545 per month, found Zillow, and Raleigh has seen an increase of 6.8% year-over-year, on average, with rents increasing to an average of $1,483 per month.

Percentages tell one story, but the data set provided by Zumper provides a different context, where the data can be viewed as the average monthly rent increase in dollars, compared year-over year.  Seen in that view, there was $210/month increase for a one-bedroom in Durham, a $190/month increase for a two-bedroom in Durham, a $140/month increase in average rental rate for a two-bedroom in Charlotte, and a $100/month increase in a Raleigh two-bedroom between May 2020 and May 2021. Charlotte one-bedrooms increased by $70/month and Raleigh one-bedrooms increased by $40/month during that same time span.

The median household income in Durham, according to the latest data from Data USA, is $54,840, which has declined by 2.72% year-over-year while housing costs, in the rental market and in the for sale market, have increased.  As a portion of share of pre-tax income, average housing costs for an average Durham household living in a one-bedroom rental changed from 21.09% in May 2020 to 22.76% in May 2021, and costs for a average household living in an average two-bedroom rental increased from 24.92 percent to 26.91 percent.

At the same time as housing costs are increasing, the consumer price index has recently increased by 4.2%, and spending is occurring more rapidly, which could be good for the state’s economy, but challenging for individuals and families. For example, according to data gathered by Opportunity Insights, North Carolinians have increased their spending by 5.1% compared to pre-pandemic levels of spending, though this measure has also changed dramatically in the last few weeks, and was at 10.1% as of May 9, 2021.