Raleigh Real Estate Forecast: #2 hottest housing market for 2018
By most accounts, it’s a very good time to own real estate in beautiful, nature-rich Raleigh, North Carolina. Zillow’s Hottest Housing Markets for 2018 report ranks the capital city number two on its list of American cities with the most sizzling hot real estate markets—second only to San Jose, California. Charlotte, another large North Carolina city, claimed the fourth position on Zillow’s list. This positive real estate forecast for Raleigh in 2018 is based on rising home values and rental prices, steady income growth, plentiful jobs, and low unemployment rates.
Employment in Raleigh
The real estate forecast by Zillow predicts Raleigh’s median home value will reach $233,900 in 2018 thanks in part to last year’s 9% income increase. Raleigh’s unemployment rate is 3.6%–lower than the national average of 4.1%. The city’s auspicious location in the middle of the research “Triangle,” means it is surrounded by several large universities, which contribute to high job growth and a low real estate vacancy rate.
Aaron Terrazas, a senior economist at Zillow, told The News & Observer, “Growing cities in the Sun Belt, places like Raleigh, Charlotte and Nashville, offer plenty of opportunities [in] health care and finance, while providing a less expensive, but still convenient alternative to the larger and pricier markets in the Northeast.”
“We’ve never had mortgage rates this low when the employment rate is so high,” Terrazas told ABC11. “Raleigh has a very strong job market, and actually the construction is at a slower pace than before the mortgage crisis,” he added.
Construction and inventory: Raleigh real estate forecast
Despite Raleigh’s strong job sector, new housing construction has been on the decline since last year: single-family housing permits have declined by 3.6% over the last 12 months, while nationally, the average rose by 2.3%. Although new construction is usually a major driver of supply, foreclosures and short sales are now exerting a more significant influence on the rising number of homes on the market available for purchase.
Foreclosures will be a factor impacting home values in the next several years. Even though just 0.2 homes are foreclosed per 10,000, which is lower than the national value of 1.6, with a rise in inventory, downward pressure has been placed on median home prices, which may be at least in part responsible for the lower than average median home prices currently circulating in Raleigh. For the last few years, incessant demand in Raleigh’s real estate market has been up against a short supply of available homes, but experts say supply will soon be catching up in part because buyers aren’t going from house to house so much anymore, but rather to newly built homes.
In a special ABC11 investigation, a Raleigh real estate forecast pieced together the most thoroughly comprehensive report possible on the Triangle’s housing growth and analyzed the data to determine what factors might affect home prices and property values in the coming years. According to the results of the investigation, at least 653 new subdivisions have been approved in the county in the past seven years, which comes up to at least 40,888 new homes built or approved for construction. In Raleigh proper, the county’s largest municipality, the Development Services Department approved 279 subdivisions—equivalent to 4438 homes. But those numbers do not even come close to matching the construction in the city’s thriving suburban areas, including Apex (62 subdivisions; 7851 homes) and Wake Forest (39 subdivisions; 6766 homes). The main reason for this increased supply of homes is simple: increased demand.
Fast appreciation in spite of lower prices in Raleigh real estate
As forecast, and in similar fashion to the rest of the country, home prices in Raleigh, North Carolina are up from last year, but beginning to show signs of slowing. Following recent appreciation rates, and in spite of Zillows’s higher projections for the city’s home prices, the current median home price in Raleigh is $212,500, which means the Raleigh housing market is still lagging behind the rest of the United States, which has a current median home price of $216,567. And yet despite being below the national average, homes in Raleigh have appreciated faster than the rest of the country in the last two years—4.8% and 4.7% respectively. In the last three years, the Raleigh housing market saw a rate of about 9% appreciation. This means that homes purchased in the Raleigh housing market one year ago have appreciated by an average of $12,821, whereas the national average was $12,783 over the same period.