There’s been a “shocking” decline in the number of lower-priced homes for sale in the Triangle over the past five years.
That’s how Stacey Anfindsen, an appraiser with Birch Appraisal, put it after combing through the numbers in his monthly Triangle Area Residential Realty Market Report.
Since June 2013, the number of homes available with a list price below $150,000 has declined by 92 percent, according to Anfindsen's analysis.
The number of homes available between $150,000 and $200,000 has also been in a downward spiral, dropping 73 percent over the same time frame.
And for homes priced between $200,000 and $299,999, there has been a decline in for-sale properties of 40 percent.
To be sure, the Triangle's housing inventory has been low for the past several years with the total number of homes for sale falling by 43 percent from May 2013 to May 2018, according to Triangle Multiple Listing Services. The Triangle currently has just over a two month supply of homes on the market.
Still, Anfindsen said: “The percentages are shocking. Having 92 percent less of anything is never any good. Really the new home builders have not been able to produce that product for the last five years, maybe 10 years. There has literally been no new construction houses added (in those lower price ranges). It’s been mostly re-sale.”
This is leaving potential home buyers who can only afford homes below $200,000 — often referred to as "starter homes" — in a precarious situation, as the Triangle housing market continues to surge on the back of a strong economy that is attracting thousands of new residents, Anfindsen said.
Those home buyers — people making between $25,000 to $35,000 — are having “to move out, way out” to find that price range, he added.
Only 29 percent of homes now on the market in the Triangle — which includes Wake, Durham, Orange and Johnston counties — are listed below $300,000 and only 8 percent are below $200,000, Anfindsen said.
Because of the rising prices, realtors like Nicole Simon of Allen Tate are expanding where they take their clients.
"I will go anywhere for my clients. I work the whole Triangle," said Simon, who mainly sells homes under $250,000. "I sold in Sanford, and in Dunn. The lower-price-range clients are having to go farther and farther. There is no inventory" in Raleigh.
Simon said since the last fall, areas like Clayton, Smithfield and Burlington have become more popular with people who work in Raleigh and Durham, but want to find a home under $250,000. This is especially true, she said, for first-time home buyers.
"You definitely have to set (first-time buyers) up for the way the market is. Homes are going quickly and not under asking price," she said. "In the under $250,000 range, if a home has been on the market for more than a week people are wondering what's wrong with it."
Simon said more and more she has been reaching out to homeowners before their homes even go on the market to give her clients an edge. The competition is especially fierce for homes under $150,000. She said one client who was deadset on staying in Raleigh for that price had 22 offers rejected before finding a home.
It's now not uncommon for buyers to purchase homes sight unseen as soon as they hit the market or for sellers to require thousands of dollars in "due diligence and earnest" money to even open discussions about buying their home, she added.
Tilyn Muhammad, a 35-year-old first-time home buyer, was one of Simon's recent clients. She and her husband were hoping to find a four-bedroom home for under $200,000 in southeast Raleigh. But after losing out on two bidding wars — they bid $170,000 on a home listed for $150,000 and still lost — they widened their search to Franklin County.
"We were actually three days away from buying a lot in Bunn ... building our own home out there," said Muhammad, who is an operations specialist for Blue Cross Blue Shield.
But because she and her husband, a barber, didn't want to move their children out of Wake County schools, they decided to key back in on southeast Raleigh.
"We definitely wanted a fenced-in back yard, but that was not in the cards," she said.
After having a conversation about "what would be absolutely necessary," Muhammad and her husband settled on a three-bedroom townhome in southeast Raleigh for $169,900. It's smaller than what they originally wanted, but she thinks they can handle the size while two of their sons complete high school.
"There's just not enough inventory for people in our price range," she said.
Muhammad said the Raleigh home market is so competitive now that many of her friends who work in the city are commuting from farther away. One of her best friends, a nurse, now commutes in from Lillington in Harnett County.
More higher-priced homes
But not every category of home has been depleted.
The number of homes available between $300,000 and $399,000 has increased by 11 percent since June 2013.
For homes priced between $400,000 and $599,999, there has been a 52 percent increase in inventory, and for homes between $600,000 and $799,999, there's been an uptick of 42 percent.
And for the highest bracket tracked — homes available above $800,000 — the inventory has increased by 25 percent.
Many of the homes in the higher price brackets are new construction.
Anfindsen says the price disparity is a simple matter of supply.
The increased costs mean new construction comes at a higher price. Most homes below $200,000 are re-sales rather than new construction, Anfindsen said.
In the past year, the average sales price in the Triangle crept above the $300,000 threshold for the first time, with the competition on the limited number of homes available continuing to push up sale prices. Most homes are now getting multiple offers and the average home is only on the market for 25 days before selling.
Another challenge is that many buyers who are looking for homes under $200,000 are competing with individual and institutional investors, who are snapping up lower-priced homes to flip or convert to rental properties, Simon said.
"Investors are looking to flip homes, especially under $150,000, that they can go in and completely update the kitchen and bathrooms, while a lot of buyers are simply looking to live somewhere," Simon said. "Investors are usually cash buyers, while most people need 40 days to close. They are losing out."
A political issue
The average sales price in the Triangle is now up to $307,319, according to the most recent data. A study by HSH, a publisher of mortgage and consumer loan information, found that an individual would need to make at least $57,521.42 a year in order to afford the principal, interest, taxes and insurance on a median-priced home.
The rising prices have caught the attention of city leaders across the region, as affordability has become one of the leading political issues.
“Either we build more houses or the price of housing is going to go through the roof, and we need more density," Durham Mayor Steve Schewel said recently about increasing home prices in that city.
But, even as some cities start thinking about housing density, the number of condos and townhouses for sale in the Triangle keep falling. The inventory of condos for sale since 2013 has fallen 51 percent and townhouses have declined 33 percent.
"I would say around 90 percent of the condo inventory is priced below $250,000, and around 50 to 60 percent of the townhomes is below $300,000," Anfindsen said.
But not enough of those denser developments are being built in Cary or north Raleigh, rather they are being built near downtowns at a higher price point, he added.
Anfindsen said local governments need to be doing more to alleviate the problem.
Since high land prices make it difficult to build new housing under $200,000, "alternative solutions must be explored from a development and governmental perspective," he wrote in his report.
That could mean redeveloping malls and old big-box retailers into housing, changing zoning laws or decreasing the cost of permits, he said.