Many forecasts have been made about the shape of the economic recovery. However, one-size-fits-all simply doesn’t apply to the economic recovery we’re hoping for here in the Raleigh-Durham area. Different industries are going to experience recoveries of varying shapes.
Let’s start with the V-shaped recovery. Some industries and individuals have experienced a recovery that rebounded so quickly that the V is like the blade of a steak knife. The stock market took a dramatic plunge from February 2020 to March 2020 but has almost fully recovered. Anyone with money in the market experienced the stress of volatility. If they stayed the course they are doing just fine today.
The housing market is also benefitting from a V-shaped recovery. According to Bankrate.com, residential interest rates are hovering around 3 percent. Cheap financing paired with lack of homes available to buy has caused a dramatically one-sided market where sellers of homes priced even as high as $500,000 can often be assured of multiple offers that tend to drive prices high and fast.
Buyers in the Raleigh-Durham market are finding that purchasing a home is now a competitive sport. They often are required to tour a home and make an immediate decision then commit significant amounts of money before performing any due diligence on the property, just to win the bid. If they lose, which happens often, they have to turn around and do it all over again.
This frenzy benefits all professional participants in the residential market, from real estate brokers to home builders and all the way to closing attorneys.
While many buyers are saddling up, beefing up offers and staying in to win, others are sitting it out for now. These buyers anticipate a bubble burst in the near future, after which they hope to drop in and scoop up the home of their dreams at a lower price. There is no doubt that low interest rates have facilitated some of the incredible price increases we have seen in the Raleigh-Durham.
However, inventory is limited for new and resale homes and isn’t expected to be increased any time soon. This also puts pressure on the market.
Some potential sellers aren’t moving because they are now working from home. This new work-from-home reality amplifies both the hassle of cleaning up for showings and potential for greater exposure to COVID. New home builders are applying for new communities around the region, but it will take a while for that inventory to come online, and even then, may not keep pace with migration into the area.
Home prices are further being supported by macroeconomic factors of our region. The NC Triangle is heavily populated with technology, biotechnology, medical, and university jobs. These jobs pay well and many can be done remotely or are considered essential work.
With any time of uncertainty, there is volatility, and we may see a correction, potentially as interest rates start to increase again. However, ultimately there are so many other factors influencing the residential market, I suspect we will see home prices flatten in the long run. If you’re a residential buyer looking for a steal, you may be in for a long wait.
Stay tuned for my next post on how other sectors will shape up.