Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets. That includes stories on how to win in the Triangle real estate market as a buyer and how sellers can prepare a home for sale in order to get top-dollar offers. As we enter 2023, a forecast shows that buyers and sellers in Raleigh will battle in a more balanced Triangle real estate market.
RALEIGH – Renting a home in the Triangle has become much more expensive in the last two years, but new data on the rental market shows that there has been a 4% decrease in rent prices in Raleigh since August 2022, about 1% per month.
And in Durham, rent prices have decreased by 6% since August, according to the data from Apartment List.
“This is consistent with most rental markets across the country,” said Rob Warnock, a member of the Apartment List research team. “High inflation followed by higher interest rates have quelled demand for housing, and prices have fallen as a result.”
Still, for anyone who’s anticipating a move to a new rental, you may face some sticker shock. Apartment List data put year-over-year rent growth at 5.2% in the city of Raleigh.
While that remains below the unadjusted inflation rate for shelter as released in Thursday’s Consumer Price Index, a different report released this week ranks the Raleigh metropolitan area as the region where asking rent has grown second most in the last year.
“Inflation is still too high,” said Tom Barkin, the president and CEO of the Federal Reserve Bank of Richmond, in a presentation at the North Carolina Economic Forecast Forum last Friday. “We forecast additional rate increases this year.”
On one hand, continued interest rate increases could mean that price appreciation in the for sale market may slow, Barkin noted.
But when interest rates are higher, homeowners may then choose to remain in their homes, rather than move out or move out and convert it to a rental property. Meanwhile, with higher interest rates, affordability is an ongoing concern for would-be first-time homebuyers who would otherwise rent.
And when more people who wish to buy a home are unable to do so, demand in an area for rental housing could stay elevated, meaning prices could rise as well.
Despite the Federal Reserve’s multiple decisions to hike interest rates in 2022, the cost of shelter continues to rise, and outpaced the overall inflation figures once again.
According to a statement released by the U.S. Labor Department and the Bureau of Labor Statistics on Thursday, for December 2022, “the shelter index continued to increase, rising 0.8 percent over the month.”
Further, the statement noted that the “rent index rose 0.8 percent over the month, and the owners’ equivalent rent index also rose 0.8 percent.”
Affordability of housing remains major challenge for Triangle
Meanwhile, with borrowing rates increasing and price appreciation for housing slowing, along with ongoing increases to the cost of labor, it’s no surprise new construction of homes and of multifamily properties has slowed, said Sarah House, a senior economist and managing director at Wells Fargo, at an event earlier in the month.
It comes back to affordability, said House. “With that affordability of housing being hit so hard,” said House, building is also slowing down. Still, though, rents are up about 30% since 2019, said House, adding that “affordability has been a challenge in the multifamily sector, too.”
The cost of shelter remains a key contributor to persistent inflation, and for households in the Triangle, the fight against inflation is far from over, Dr. Mike Walden, an economist, told WRAL TechWire on Thursday.
And other signs show that rents may continue to rise in the region, especially as the spring market arrives.
That’s because the median asking rent in the Raleigh metropolitan area rose 24% and the median asking rent in the region was $2,133, according to the latest rent report from national real estate brokerage firm Redfin.
And that 24% mark is higher than the year-over-year growth in the region recorded in November, when Raleigh ranked first among all of the markets included in Redfin’s analysis at 21.4% growth in the median asking rent.
Like other sectors of the economy, housing markets may be primed for another roller-coaster of a year, House indicated.
“It’s still likely that rents go up in the coming spring and summer,” said Warnock. “But I expect these increases will be modest compared to the rapid price growth that we experienced in 2022 and 2021.”
Which is, at least, some good news for those who’ll be looking to move in 2023.
WRAL TechWire reporter Jason Parker, who is also a licensed North Carolina real estate agent, works with journalists from WRAL.com to track and present market data and report on how people are experiencing the region’s changing real estate markets. These special reports will use the category tag “Triangle Real Estate” or “Triangle Real Estate Market.