RALEIGH – A continuing trend appears across multiple reports that track the availability and affordability of housing in the Triangle: those who live in the area are feeling squeezed as prices rise in the for sale market and the rental market.
A new report from Apartment List found that the vacancy rate in Wake County is lower now than a year ago, and the price of renting in Raleigh has increased as well. And a newly published index that tracks the rental market against expectations is showing that the region’s rentals are, on average, more than 10% more expensive than expected.
So, what’s going on in the Triangle’s housing markets?
A year ago, the vacancy rate in Wake County was 5.56%, according to the new Apartment List index and report. But that’s dropped in the last year as demand for housing has increased. As of the most recent analysis, the vacancy rate is now it is lower now 4.88%, despite nearly 5,000 rental units added to rental inventory since May 2021.
While many of those new additions are in multifamily apartments, not all of them are. Brett Cox, research manager at JLL, estimated that more than 4,150 new multifamily residential units finished construction in Wake County in the last 12 months.
But there were also more than 800 residential homes, built with the intention to become rental properties, that were delivered in the prior 12 month period, estimated Cox.
That’s in addition to an estimated more than 5,500 new homes built in Wake County in the same period. Raleigh is one of the nation’s leaders in homebuilding, a recent Redfin analysis found.
So even though more housing is being constructed across the region, vacancy is low. And, still, housing prices have risen at a torrid pace. So, too, has the price of renting a house or apartment in the region.
Rents up nearly 20% – and more than 10% higher than expected
In Wake County, the monthly price of rent has shot up by $249, or 19.7%, in the area, compared to last May, data from Apartment List that was obtained by WRAL TechWire reveals.
For a two-bedroom apartment, those seeking to lease a new place can now expect to pay $1,479 in Wake County, as the data shows that as the median monthly price. A year ago, the median monthly rental rate for a two-bedroom apartment was $1,234. That’s a difference of $245 for a two-bedroom apartment, an increase of nearly 20%.
And though typical rents in Raleigh have risen, many of the newer apartment units in the area are coming on the market at price points higher than the median. Take the planned 297-apartment project led by Richmond-based Capital Square in the Warehouse District, where rents are anticipated to average about $2,600 per month.
But renting in Raleigh shouldn’t cost that much, a new index produced in collaboration from three housing economists shows.
The Waller, Weeks and Johnson Rental Index, recently published, found that for April 2022, the average rent in Raleigh, across all observable housing types and housing units, was $1,706.
But based on historical trends and averages, the index found that Raleigh’s renters are paying an additional 10.72% in rent now than what would otherwise be expected. The index calculates expected rent of $1,540, a difference of $166.
“We predict where rents should be, compared to where they actually are, and then we calculate the premium,” explained Ken H. Johnson, one of the developers of the index and a real estate economist, in an interview with WRAL TechWire this week.
Part of what is happening is that Raleigh and the Triangle continue to attract more people to move to the region than those who are electing to move away from it. That difference, called net migration, is believed to have accelerated in recent years, as well.
The latest LinkedIn Workforce Report found that the Triangle ranks 6th in the nation for population gain by the analysis of the professional network’s data.
For every 10,000 workers in the region with a LinkedIn profile, 51.74 arrived in the last 12 months, the data shows.
“Most areas that are experiencing population growth are going to have a prolonged period of unaffordable housing,” said Johnson. “You’ll see a long term lack of affordable housing.”
Some real estate agents expect that prices could double in the next five to ten years. So, a $400,000 home now would sell on the open market for $800,000, an agent explained to WRAL News earlier this week.
One of the factors contributing to that possible reality is an influx of high-paying jobs, such as those in technology or the life sciences. But it’s also across the region and the state where economic development is occurring. Already, in 2022, through the end of May, $7.9 billion in new investment and more than 18,000 jobs are coming to the state, according to North Carolina Secretary of Commerce Michelle Baker Sanders, who shared an update at a recent board meeting of The Economic Development Partnership of North Carolina (EDPNC).
Those figures follow what one EDPNC executive called a “blockbuster year” for economic development in 2021.
People need shelter – and there’s a shortage
The executive director of the North Carolina Budget & Tax Center recently estimated that North Carolina will experience a shortage of 900,000 housing units by 2030.
Population growth is significant in Raleigh, noted Johnson. And one forecast for growth is that within a 25-mile radius of Raleigh’s city center, the population is expected to increase by 25% over the next decade, Johnson cited.
“For every four people, right now, in the Raleigh area, we’ll expect that to grow to five people in the next several years,” explained Johnson. “You’ve got so many people coming.”
And the growth isn’t just going to occur in a limited geography. Land development is occurring within Raleigh’s commuting zones and within the counties that comprise the Research Triangle Regional Partnership. That includes in Johnston County, for example, where a 2,000 home residential project was just approved, as well as multiple projects underway in Chatham County, the home of the future VinFast automotive assembly plant.
So, why are home prices and rental prices increasing? There just aren’t enough housing options for people and there are existing challenges. And renters may be even more squeezed than others who already own a home but are seeking to move for one reason or another.
“[There are] too many people moving here, not enough [housing] being built, and add in rising interest rates, and you have another force keeping people renting versus buying,” said Brian Leary, the COO of Highwoods Properties, in an interview with WRAL TechWire earlier this year.
Which could mean that even if housing prices stabilize in the coming months, as some economists expect, rental rates might continue to increase in the Triangle.