Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets, including the region’s rental markets, when to rent and when to buy, and why housing affordability has fallen, the topic of today’s report.
+++
RALEIGH – The cost of housing is leaving many Wake County residents in a bind.
Despite a slight increase in housing affordability in December 2022 compared to November and October, home ownership was 31.7% less affordable for homebuyers than it was the prior year, the most recent data from Triangle Multiple Listing Service found.
And the cost of shelter is increasing for those who rent in the Triangle, as well, with Raleigh rent growth outpacing the nation over the last five years, according to the latest report from Apartment List.
“The market just isn’t creating the housing that folks can afford,” said Stephanie Watkins-Cruz, director of housing policy for the North Carolina Housing Coalition in an interview with WRAL TechWire. “And what that starts to lead to is a lot of instability in other areas, in other fields, and in other areas of our local economy.”
With rising rent prices and rising costs associated with homeownership, which is better, renting or buying? That depends, but either choice might mean much higher costs than a year ago.
Should you rent or buy a home in Triangle? Study says renting offers lower costs
What’s happening
According to the Triangle Multiple Listing Service, TMLS, the region’s affordability improved slightly last month as mortgage interest rates fell slightly and home prices inched downward in some parts of the region’s real estate market.
The latest data from TMLS, known as the Housing Affordability Index, improved from 68 in October and November 2022 to 71 in December 2022. Still, that mark is the second lowest index score on record, trailing only the two prior months of data. A year ago, the index measured 104, meaning the median household income in the Triangle was 104% of what was necessary to qualify to purchase the median priced home under prevailing mortgage interest rates.
Now, the median household income is just 71% of what is necessary to qualify to purchase the median priced home, given today’s mortgage interest rates. Those remained slightly above 6% in the prior week, according to Freddie Mac data.
Today’s mortgage rates are more than 2.5 percentage points higher than they were at this time last year. A $400,000 mortgage loan at a 6.13% mortgage rate, the weekly average recorded by Freddie Mac, would result in a monthly payment of principal and interest of $2,432. A year ago, borrowing $400,000 at a 3.55% mortgage rate would have yielded a monthly payment of $1,807, a difference of $625 monthly.
Raleigh rents are falling, but that trend is not likely to last
Not much better for renters, either
And housing affordability isn’t any better for renters, either.
“Rents are really high, and housing is really expensive, particularly in areas that are growing,” said Watkins-Cruz. “That is a persistent trend in the Triangle.”
That’s because Raleigh rents have skyrocketed in the past five years, including outpacing national rent price growth each of the last four years, according to a new report from Apartment List. According to the data:
- 2018: +3% in Raleigh, +3% nationwide
- 2019: +3% in Raleigh, +2% nationwide
- 2020: +2% in Raleigh, -1% nationwide
- 2021: +21% in Raleigh, +18% nationwide
- 2022: +5% in Raleigh, +4% nationwide
Now, the median monthly rental price for a two-bedroom apartment, as of December 2022, is $1,472, according to Apartment List.
Raleigh rents have increased every month since September 2020
A Redfin report from December 2022 showed that Raleigh rents grew at the fastest rate among any of the 50 most populous metropolitan areas for which there was rental data available. The rental price growth rate of 21.8% measured in the report was about three times the rate of inflation for the cost of shelter as measured by the Bureau of Labor Statistics.
And even though the latest month of data showed that Raleigh rents had ticked down from prior highs seen in August 2022, Rob Warnock, a member of the Apartment List research team, told WRAL TechWire earlier this month that rents are still expected to increase in the spring and summer months of 2023.
“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.”
And rents may already be climbing compared to December 2022. Yet another report on Raleigh's rental market was released by Zumper on Thursday, which found that Raleigh has the 55th most expensive rental market in the nation, with year-over-year rent growth of 7.6% between January 2022 and January 2023.
According to Zumper, the median rental price for a two-bedroom apartment in Raleigh was $1,550 as of January 2023.
“That’s a concern, because over a third of our households in North Carolina are renters,” said Watkins-Cruz. “It’s not a small group of folks.”
1 in 4 Wake County households struggle to afford their house
While home sale prices have slightly outpaced the increasing cost of renting in Raleigh over the prior four years, more than 1 in every 4 households are facing affordability challenges entering 2023, the North Carolina Housing Coalition found. That's no improvement from a year ago, either.
The report uses data from the Bureau of Labor Statistics, Census Bureau, Housing and Urban Development, and the North Carolina Judicial Branch to tracks housing affordability in each of the state's 100 counties.
In Wake County, there are slightly more than 109,000 households, or 26% of all housing units, where families are considered cost-burdened, the report found.
That means that the household spends more than 30% of their household income to pay for costs associated with shelter.
Sixteen % of households that own their home (43,560 families) are cost burdened, and 45% of renters face difficulty affording their residence.
“It’s the rise in rents, the high demand, the supply not keeping up with demand, and we’re also at the intersection of wages and what rents are like,” said Watkins-Cruz. “If you’re earning a minimum wage or you have a salaried job, more consistently, both and both of those categories are feeling the impact.”
Image: North Carolina Housing Coalition. Data: 2023 County Profiles.
Wages aren't keeping up
Nationally, workers are experiencing a decrease in real wages, the most recent data from the Bureau of Labor Statistics found.
According to the December 2022 report, workers saw "a 3.1-percent decrease in real average weekly earnings" between December 2021 and December 2022.
And alongside rising housing costs, that's leaving many in Wake County struggling to afford a place to live.
According to the NC Housing Coalition, which released the Wake County profile this week, the hourly wage necessary to afford a fair market apartment in the region is $27.15 per hour, equivalent to an annual wage of $56,480. Across the Raleigh metropolitan statistical area, which includes Wake, Johnston, and Franklin Counties, workers had an average hourly wage of $28.15 in May 2021, according to the most recently available data from the U.S. Bureau of Labor Statistics.
“Typically, asking rents are $200 or more above the fair market rental rate,” said Watkins-Cruz. “How does that work?”
Pharmaceutical giant Eli Lilly announced earlier this week that it would expand its footprint in the Triangle, with plans to add 100 jobs that pay average annual wages of $56,400. According to the U.S. Census Bureau, the median household income, expressed in 2021 dollars, was $88,471 and the per capital income, in 2021 dollars, was $45,425, while 9.1% of households were earning incomes that placed the household under the federal poverty line.
Image: North Carolina Housing Coalition. Data: 2023 County Profiles.
+++
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.
