RALEIGH – A measure of housing affordability has dropped to an all-time low, for the second consecutive month. That’s according to a monthly index of housing affordability measured by the Triangle Multiple Listing Service (TMLS), which found that for February 2022, the Affordable Housing Index fell to 88.
The index was 92 in January, which at the time was an “all-time low.” Last month, the executive director of TMLS, Matt Fowler, told WRAL TechWire that with housing inventory at an all-time low, affordable homes were harder and harder to find, and harder and harder to buy.
The TMLS index tracks the relationship between the median household income in the Triangle with what it would take to qualify to purchase the median priced home sold in the region.
Put another way, when the index is at 100, median household income would be 100% of what was necessary to qualify to purchase the median-priced home at current mortgage interest rates.
“Regardless of whether they rent or own, most households find housing costs to be their largest expense,” Duke University professor John Quinterno told WRAL TechWire last week. “The greater the proportion of income they devote to housing, the less they have to spend on everything else. When housing costs generally increase faster than income, households may find themselves squeezed and paying may for housing that has not increased in quality.”
Raleigh 4th, Charlotte 2nd, for greatest home price increases in U.S.
Homes less affordable now than ever before
For February 2022, the TMLS Affordable Housing Index fell to 88, a new all-time low. That’s in part because mortgage rates have begun to tick up this year, though mainly because homes continue to increase in price in a highly competitive real estate market.
Compared to February 2021, homes were 25.8% less affordable in February 2022, for the typical homebuyer. And, Triangle-wide, the median price of a home sold in February 2022 was 23.9% higher than the median price of a home sold in February 2021, according to TMLS.
Image from the Triangle Multiple Listing Service Monthly Indicators Report.
“Too often, housing ‘affordability’ is portrayed as an issue facing low-income workers, but in reality, it is a concern for people all along the age spectrum,” Quinterno said. “Older adults, people with special needs, and others on fixed incomes also face notable struggles.”
And even younger adults or adults in the middle of their careers, with relatively good jobs and good incomes face challenges in the housing market, Quinterno said.
Priced out of the market
Sarah Sanborn was living with her family in a rented apartment at the onset of the global pandemic. By the beginning of 2021, the first-time homebuyer and her family began to look at what other options might be possible, desiring easier access to outdoor amenities and reasonable commutes to work.
“We assumed we might buy in Durham or in Pittsboro,” Sanborn told WRAL TechWire earlier this month. “When we started looking about a year ago, we were blown away with how high prices had risen.”
Affordability was a critical factor for Sanborn and her family. Sanborn, whose work requires commuting by car to Carrboro, Siler City and Sanford, quickly came to realize that the home that she desired for her family might not be possible.
“It was important for us to keep the price on the lower end of what our affordability is,” Sanborn said. “It just wasn’t possible for us to find anything in Durham.”
Triangle housing market: Demand at ‘all-time high’ but affordability at ‘all-time low’
Looking outside the city
So, the Sanborns began to look further and further away. They worked diligently, put in five offers, and even had one accepted for a property in Siler City, Sanborn said. But the inspection report came back with major issues, so the family had to walk away, and resume the search.
Ultimately, Sanborn did find a home to buy. However, the family had to make some compromises in order to close on the home and move into it.
“We came to see the house before they’d posted any interior pictures,” Sanborn said. “We showed up and they were having a yard sale.”
The next day, Sanborn put in an offer on the home at $4,000 above the asking price.
The home has two bedrooms, not the three that they’d originally planned for. And, it’s in Sanford, not in Durham or Pittsboro, as they’d originally hoped.
“This is the first home that I have purchased,” Sanborn said.
The homebuying process was really challenging, Sanborn said.
“It was really difficult to educate myself and learn about how the market should be in normal times, then adjust on the fly given what was actually happening in the market,” she said.
Sanborn called the process “difficult” and “frustrating.”
“We’d see a house, think that it could work, schedule an appointment to see it that day, and by the time we’d left the property from the showing, they’d accepted another offer,” Sanborn said.
It took dozens of showings, nearly a year of searching, five offers, and compromising on layout and location in order to secure a property the family felt was affordable.
“This wasn’t exactly what I was looking for,” Sanborn said. “We’re not intending to stay in this house for a super long time.”
Raleigh’s real estate market 16th in nation for price gains in last decade
Market data
Between February 2020 and February 2021, the median home sale price across the entire Triangle region served by Triangle Multiple Listing Service (TMLS) increased by 8.1%.
Between February 2021, when the median sale price across the region was $302,590, and February 20222, the median sale price increased nearly three times that much, 23.9%.
According to the TMLS data, the median sale price of a home sold in February 2022 was $374,900, up more than $72,000 in one year.
In Wake County, the median sale price rose from $352,038 in February 2021 to $435,000 in February 2022, according to TMLS data. That’s a one-year difference of nearly $83,000, within a few thousand dollars of the median household income in the county.
When Sanborn began her search in February 2021, the median price of a home in Durham County was $288,000.
Now, the latest data from TMLS shows that the median price of a home in Durham County in February 2022 was $390,000.
That’s an increase of $102,000, or 35.4%.
And fewer homes are available on the market, which means that with demand remaining high, would-be buyers may wish to prepare for a bidding war in order to secure a contract.
Prepare for a bidding war: Most Triangle home sales top list price, some by $100K+
What it takes
Sarah Calhoun and her partner began to look for a home after the winter holidays.
“We had a budget in mind of what we wanted to do,” Calhoun said in an interview with WRAL TechWire last week. “After making our first offer on a house, we realized we were going to have to change our budget.”
That first offer was $40,000 more than asking with $30,000 in due diligence, a non-refundable fee paid to the seller of the home at the time the purchase contract is signed and agreed to by both parties.
“That house ended up closing at $60,000 over asking,” Calhoun said.
They identified another property.
Calhoun and her partner put in another offer: $60,000 over asking and $30,000 in due diligence.
They didn’t win the contract.
“That second house ended up selling for $90,000 over asking,” Calhoun said. “We couldn’t have even touched that number.”
Calhoun kept up the search, and thanks to her real estate agent, had notifications sent directly to her when new homes that met their criteria came on the market.
“The next one we wanted to go after,” Calhoun said. “It popped up as a ‘coming soon’ and so we texted our real estate agent that we wanted to schedule to see it immediately.”
It was 10 p.m.
“We wouldn’t normally do that, but in this market, we had to,” said Calhoun.
Cost-of-living ‘crisis’: 25% struggle to find, afford homes in Wake County
How did it turn out?
“We didn’t even get a chance to see that one, it went pending overnight, and was bought sight unseen,” Calhoun said.
Calhoun and her partner own their current home, in an established neighborhood close to RTP. However, what it took to get that home is an entirely “different game than we are playing now,” Calhoun said.
“We are fortunate enough, and fortunate isn’t even the right word,” Calhoun said. “To even be able to play in this game, when so many people can’t.”
The fourth home they pursued, they won the contract. They closed on the property last week. The winning offer, according to Calhoun, was $80,000 over asking price and $40,000 in due diligence.
“That’s asinine,” Calhoun said. “It blows my mind.”
They move this week.
“All families should have the chance to get an opportunity, but they can’t,” Calhoun said.
She told WRAL TechWire that when they received word that their offer was accepted, she didn’t feel at all happy. Instead, she felt sick.
“It’s really about privilege,” Calhoun told WRAL TechWire. “It makes me sick that we’re able to play this game, but the average person can’t.”
