Which Direction is the Raleigh Real Estate Market Heading?

[Benjamin Carver]

If you're tracking Raleigh, North Carolina prices then you know... we've grown a lot over the past few years. The US real estate economy in general has boomed thanks to COVID and previous rate drops.

Currently, a single-family home costs you $430k median, and rates sit around 6.75% still. With historically high prices and last year's rate increases, you're left wondering ... what comes next?

I spend all day working in real estate here in Raleigh, North Carolina, so I'm hearing A LOT of this: "I want to buy a home in Raleigh but prices are just too high, I'm going to wait for them to drop in price or rate or both and see what happens."

The argument I often hear made is this:Raleigh is going to experience price drops to bring us back to some sense of normalcy. This is a totally reasonable expectation, but before you jump to that conclusion, you should have all the facts.

Typically, a market that has been artificially inflated must eventually come back down. Historically, that's how economics work. The thing is with Raleigh specifically, is that much of our inflation is a natural outcome of strong growth:
- Many Fortune 100 companies and 500 are establishing headquarters here
- A significant influx of people moving into the area. We are one of the fastest growing places and most moved to (both before and after covid)

Here's the kicker: Our market was already on a STRONG upward trajectory even *before* interest rates dropped during COVID. And despite the higher rates this past year which deter many buyers, we *still* find ourselves in multiple offer situations, indicating we are still hot while many markets have long cooled.

To illustrate, my team recently sold a home for $50k above the asking price after a successful open house with over 50 attendees, just a few days on market. This is still a VERY common trend here with homes going off market after an open house (about 3-5 days into it). Our new construction market, which is huge here still commonly sells out homes well before they are even built. Many builders are limiting the homes they can sell each month so they don't outpace their building capabilities. They are struggling to keep up with demand.

If anything has changed, the days of investors performing cosmetic rehabs for quick $100k profits are behind us. The acceleration of low rates has faded and we find ourselves similar to our previous norm for growth.

I don't pretend to possess a crystal ball, no investor or agent could, but drawing on my experience in the daily dynamics of the market here in Raleigh, and looking at the facts, a price drop seems unlikely in the next few years. Here's why.

People are drawn to our area due to the absence of natural disasters, low property taxes, home prices close to the national median, and a thriving tech and research hub, coupled with the life sciences sector.

Considering the ongoing influx of people and the likely rate adjustments announced by the Fed for later in this year, we anticipate prices actually  rising as buyers enter the market. Most likely higher prices in 2025 and 2026 as a result, along with increased competition and missed opportunities for appreciation this year to those who wait.

At this rate, the only event that has the potential to cause a downturn in the Raleigh real estate market is if suddenly everyone stops moving here and buying here OR the economy at large experiences a deep recession. Mind you we have been officially in a minor recession the past 2 years and Raleigh's growth continues very strong. And almost unanimously experts agree a major recession is not in the cards for the near future.

At the end of the day, you can always wait to see if prices drop or the US economy has a downturn but you could be waiting a long time. Research shows that you have about an 11% chance of timing the market. The biggest risk in my opinion is that you end up paying more in the end and are possibly in a worse situation by the time you realize it.

The question remains, of course.... If prices don't drop and I want to buy but I can't stomach the prices - what do I do? The good news is there are still plenty of affordable suburbs in the Raleigh-Durham area that offer affordable housing, even new construction with special rates and incentives offered by builders. Some sellers offer assumable rates for a premium price, although these are more rare. And at the end of the day, buying now with the plan to refinance and tap into natural and or forced equity in a few years is almost always a solid move.

Those are my two cents on the market if you're on the fence. Always happy to discuss more. Take what value you will, validate, and come to your own conclusion.