When the 927 West Morgan apartment community opens next month near downtown Raleigh, it will offer residents a level of luxury that earlier generations of renters would likely find unrecognizable.
The 249 units will feature granite countertops, stainless steel appliances, faux hardwood flooring, plus two saltwater swimming pools, two health clubs and outdoor grilling stations.
Such comforts have become increasingly commonplace in apartment projects in the Triangle, which has not gone unnoticed by many real estate agents who have younger clients looking to buy.
“A lot of folks are situated in very nice rentals right now,” said Kelly Cobb, a real estate agent with Fonville Morisey in Cary. “These apartment complexes have gyms, and they have granite and they have stainless steel. If they can’t go buy that, they’d just as soon continue to rent.”
The willingness of many younger buyers in their 20s and 30s to be both picky and patient helps explain the ongoing strength of the Triangle apartment market. Although the region’s housing market has improved considerably over the past year, the recovery hasn’t converted nearly as many renters into owners as had been expected.
The region’s apartment vacancy rate hit a 12-year low in September, according to data from Karnes Research and the Triangle Apartment Association, even as landlords raised rents by 9 percent over a three-year period.
And rents have been rising as homeownership has become more affordable. Over that same three-year period, housing prices in the Triangle fell 4 to 5 percent, according to the Housing Price Index published by the Federal Housing Finance Agency. Some of the Triangle’s newer apartment communities now charge rents above $1,000 for a one-bedroom unit, sums that could easily translate into a monthly mortgage payment on a starter home given where interest rates stand.
While the lingering psychological and economic effects of the recession account for some of the hesitancy to buy, Triangle real estate agents say there also appears to be a mismatch between what many younger buyers want in a house and what is available in their price range. Inventory levels in the Triangle are near record lows, and many of the homes for sale are older and in need of updating.
“Some of their taste buds are pretty expensive. A lot of (young buyers) are not necessarily willing to go in and update,” said Jenny Lundquist, an agent with Allen Tate Real Estate in Wake Forest. “They want everything in tip-top condition to start with.”
What’s that? Laminate
Scott Moore, a 22-year-old network engineer with Cisco Systems, has two main requirements for his future home: It must be near a park and the inside has to be pristine.
“The inside just has to be spectacular for me,” Moore said. “I plan on living there for at least five or 10 years-plus, so it’s got to be something that I can live in.”
Spectacular means hardwood floors at least on the first floor and preferably darker wood-stained cabinets.
“I don’t have to have granite countertops, but a granite countertop is definitely a plus,” he said.
Moore has been house hunting in Southeast Durham for the past month, focusing on neighborhoods that would be both 15 minutes from his offices in Research Triangle Park and from Brier Creek. He currently lives with three college friends in The Enclave at Crossroads, a Raleigh apartment complex, but has grown tired of sending monthly checks for something he’ll never own.
Moore has been looking at town houses and single-family homes priced between $150,000 to $200,000. Many have lacked stainless steel appliances.
“That’s something, if it’s going to be in there already, that’s something that I really want,” he said. “I just like the way they look.”
Stacey Anfindsen, a Cary appraiser who analyzes Multiple Triangle Listing data for area real estate agents, said such expectations help explain one of the more puzzling characteristics of the region’s current housing recovery. While the Triangle now has just a five-month supply of homes on the market, the overall days-on-the-market of the homes that are selling remains well above 100 days.
“The only way that you can explain it is because of the amount of housing stock in the inventory that hasn’t been updated,” Anfindsen said. “And these buyers ... there’s no urgency for them. ... This is the first generation that has had to look at a lot of housing stock that is inferior to what they grew up in.”
The situation is producing encounters such as the one Anfindsen said an agent recently recounted to him about a showing with a young aspiring homeowner. The agent took the buyer into an older house that had laminate countertops.
“They said ‘What is that on the counter?’ They’d never seen it before,” Anfindsen said.
More apartments coming
Such expectations from buyers can be particularly frustrating for sellers because updating the finishings, appliances and floors in an older home can cost $5,000 to $10,000 at a minimum. And in today’s market, buyers likely won’t be able to recoup that money in a higher sales price.
“I call it an entry fee,” Anfindsen said.
Roberto Quercia, director of UNC-Chapel Hill’s Center for Community Capital, said one of the things that has emerged from the housing bust is that the housing preferences of the millennials, the generation born between 1978 and 2000, don’t necessarily match the housing stock that was built in the boom years.
“A lot of the housing for sale is in places that are not the kind of neighborhoods that millennials are attracted to,” said Quercia, whose center studies issues related to homeownership. Many young professionals, he said, now desire to live in more urban areas near both jobs and nightlife options, but owning a home in such places is often prohibitively expensive. He said tightened mortgage lending requirements and high levels of student debt are also changing how younger people view homeownership.
All these factors make it clear why apartment developers have proposed a slew of new projects in the Triangle, particularly in downtown Raleigh and Durham, North Hills and Brier Creek. Some apartment developers argue that the long-held notion that homeownership is somehow superior to renting has been discredited.
“The homeownership myth has been blown up,” said Jim Zanoni, an owner of the FMW Real Estate, the Charlotte developer behind 927 West Morgan. “People are waiting and going, well, I would rather rent and have the flexibility and all these amenities, which I’m probably not going to get in the price range I’m looking for.”
Such declarations may be premature, given that the bust was only five years ago. As the Triangle’s housing market improves, and prices rise, sellers will regain the upper hand, and younger buyers may be less inclined to sit on the sidelines and wait for the perfect house to come along.
“It’s dangerous to extrapolate from a time of crisis to what it would be in normal times,” Quercia said. “This would be like trying to predict the future of shipbuilding from the deck of the Titanic. ... We’ve had so many years of bad news that it’s difficult for us to envision a time of normalcy.”
News researcher David Raynor contributed.