Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets. This week, we take an in-depth look at what’s happening with rents in Raleigh and how it compares to inflation in the U.S. economy. Readers may also enjoy listening to a new WRAL podcast, Real Estate Rush, with the first four episodes now available for streaming or for download.
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RALEIGH – Now here’s real inflation: Raleigh rents are soaring at double rate of inflation. The costs are so high that the increase ranks seventh in the country, a new analysis reports. But there’s worse news—the pain isn’t over.
One UNC-Chapel Hill economist expects that the region is in the midst of a long period of unaffordability in housing markets, with no end in sight.
Here’s the latest:
A report from Redfin found that among the 50 most populous metropolitan statistical areas in the United States, Raleigh’s year-over-year rent growth increased the seventh-most, on a percentage basis.
How much have rents increased in Raleigh? Redfin’s analysis found that rents rose by 16.4% between September 2021 and September 2022, with the median asking rent now more than $2,000 per month.
Compare that to the latest data on inflation, which was released on Thursday morning by the U.S. Bureau of Labor Statistics. While the year-over-year inflation rate measured 8.2%, the cost of shelter nationally increased by 6.6%.
“The rise in shelter costs is problematic both for policymakers as it’s harder to mitigate these costs and they are slower to decelerate or decline,” said Dr. Gerald Cohen, the chief economist at the Kenan Institute in an interview with WRAL TechWire. “Especially low income households, as wages are still not keeping up with inflation.”
Good news for renters: Apartment costs in Raleigh decline in September
Raleigh rents up nearly $300/month since last year
Raleigh’s median asking rent of $2,030 in September 2022 is up from a median asking rent of about $1,743 a year ago, or $287 per month. In that same period, according to preliminary data from Triangle Multiple Listing Service, the median home sale price rose 14.1% in Wake County and 12.1% in Johnston County, both below the percentage increase of monthly rental prices in the region.
“Given the housing shortage in the Triangle and continued influx of companies it is likely that rents will decelerate more slowly than other regions,” said Cohen.
It’s not just that rents are high, and growing, it’s that housing affordability may remain a challenge in the region, with average mortgage rates for a 30-year fixed rate mortgage increasing again this week, now close to 7%, according to the latest data from Freddie Mac.
“Rents and home prices in Raleigh are significantly above their long-term trends, above where they would be expected to be based on past prices” said Ken Johnson, a housing economist and associate deal of graduate programs at Florida Atlantic University, who is one of the collaborators on a set of monthly reports that track housing markets nationwide, including Raleigh’s rental markets.
At minimum wage, it takes 90 hours/week to afford 1 bedroom Raleigh apartment
Region continues to expand; vacancy still low
But just because prices are above what is expected doesn’t mean there’s any reversal of housing markets expected in the region, noted Johnson. That’s because the Triangle is “in the middle of a significant expansion in population, pushing up the demand for housing,” he said.
As such, prices probably will not drop significantly on either rental housing or on homes for sale, said Johnson. “Instead, the area is probably in for a prolonged period unaffordability in terms of shelter cost relative to local income.”
Demand for housing persists, even as the region continues to add housing. Data from the U.S. Census Bureau shows that in 2021, there were a total of 22,304 approved permits for private housing structures in the Raleigh MSA. So far, through August 2022, the most recent month for which data is available, there were 13,679 approved permits, according to the Census data set.
But that might not be enough housing to meet the demand.
And though another recent analysis of apartment data found that rental price appreciation in Raleigh slowed year-over-year, even falling month-over-month in September, rental prices were still appreciating faster than wage growth in the region.
Further, data from Apartment List shows that the vacancy rate in the Raleigh metropolitan statistical area remained low in September, at 5.36%. Though that’s a bit higher than the historically-low vacancy rates experienced a year ago, vacancies remain quite low compared to the prior five years.
And until the region sees the supply of housing, both in rental and for sale markets, rise to meet or surpass demand, said Johnson, it’s likely that prices will keep rising.
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WRAL TechWire reporter Jason Parker, the author of the report and a licensed real estate agent in North Carolina, 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.”
