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Axios Raleigh

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Data: National Rental Home Council, U.S. Census Bureau; Chart: Thomas Oide/Axios

The brutal housing market is driving more and more Americans to opt out of buying.

That's especially apparent in North Carolina, where more built-to-rent homes are popping up than double the national average.

Why it matters: Built-to-rent housing offers a new, single-family home with property management perks, and without the need for a down payment or long-term commitment, Axios' Felix Salmon reports.

Driving the news: More than 1,000 built-to-rent homes are planned or under construction per million North Carolina residents, per the National Rental Home Council.

What's happening: These houses are in growing demand among would-be buyers who can't afford — or find — a single-family home, and those opting not to buy for lifestyle reasons, Doug Ressler of real estate research firm Yardi Matrix tells Axios.

Driving the news: National construction of new built-to-rent homes hit a record high last year, with more than 14,500 houses completed and three times as many under construction, per RentCafe.

Zoom in: Built-to-rent neighborhoods have sprouted across North Raleigh and the suburbs in recent years, as the Triangle's rapid population growth makes it attractive to investors.

In just the past month, two large national builders with multiple communities in the Triangle each submitted plans to build hundreds of built-to-rent homes in north Raleigh and Wake Forest, the Triangle Business Journal reported.

Between the lines: The surge comes as a shortage in new construction has placed a strain on the Triangle's housing market, driving up prices and rents.

Raleigh alone has a shortage of around 17,000 housing units, according to one study.

Be smart: Single-family rentals are nothing new. Like multi-family housing, the market has developed over many decades, per commercial real estate company CBRE.

The bottom line: Building more single-family rentals isn't going to solve the housing crisis, but it could ease the supply crunch.

Built-to-rent housing is surging in North Carolina

More than 1,000 built-to-rent homes are planned or under construction per million North Carolina residents, per the National Rental Home Council.

Visuals

The <a class="gtmContentClick" data-vars-link-text="brutal housing market" data-vars-click-url="https://www.axios.com/local/raleigh/2023/06/14/prices-grow-fastes-in-raleigh-suburbs" data-vars-content-id="316a5131-3cd4-4f7f-8193-8f9a489db759" data-vars-headline="Built-to-rent housing is surging in North Carolina" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/local/raleigh/2023/06/14/prices-grow-fastes-in-raleigh-suburbs" target="_self">brutal housing market</a> is driving more and more Americans to opt out of buying.<ul><li>That&#x27;s especially apparent in North Carolina, where more built-to-rent homes are popping up than double the national average.</li></ul>

Real Estate

News

As the number of homes sold in the Triangle continues to decline from last year, one sliver of the housing market is actually seeing an increase in sales — high-end condos and townhomes.

Driving the news: Under-contract homes sales declined 18.4% from June 2022 to June 2023, according to data from Triangle Multiple Listing Services.

But if you narrow it down to townhouses and condos priced at $470,000 and up, sales are up 14.3% year over year.

The big picture: More buyers have turned to condos and townhouses as housing costs surge, Realtor.com analyst Hannah Jones tells Axios.

Across the U.S., that segment's prices are now climbing at a faster clip than single-family homes, the real estate company's data shows.

Why it matters: Condos' growing appeal comes as younger buyers look for more affordable homes, and empty nesters want to downsize to a maintenance-free lifestyle, real estate experts say.

It's also a sign that the Triangle is continuing to build denser types of housing, as most new homes constructed near its urban centers are condos or townhomes.

By the numbers: In May, the median sales price of a single-family home in Raleigh was around $429,000.

By comparison, the median sales price for a condo was $275,000.

Be smart: Homeowners' association fees, which vary from building to building, factor into the cost of owning a condo.

Triangle homebuyers flock to condos and apartments as housing costs surge

While single-family home sales continue to decline, condos and townhomes are increasing

Real estate

As the number of homes sold in the Triangle <a class="gtmContentClick" data-vars-link-text="continues to decline from last year" data-vars-click-url="https://www.axios.com/local/raleigh/2023/07/14/housing-supply-north-carolina-mortgage-rates" data-vars-content-id="31da086d-16fc-4c6b-88b2-d859a7632aab" data-vars-headline="Triangle homebuyers flock to condos and apartments as housing costs surge" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/local/raleigh/2023/07/14/housing-supply-north-carolina-mortgage-rates" target="_self">continues to decline from last year</a>, one sliver of the housing market is actually seeing an increase in sales — high-end condos and townhomes.Driving the news: Under-contract homes sales declined 18.4% from June 2022 to June 2023, according to data from Triangle Multiple Listing Services.<ul><li>But if you narrow it down to townhouses and condos priced at $470,000 and up, sales are up 14.3% year over year.</li></ul>

Data: Moody's Analytics; Table: Kavya Beheraj/Axios

Rents in Raleigh are still much higher than they were before the pandemic. But since the second half of last year, they've been on a steady downward trajectory. 

By the numbers: In the fourth quarter of 2022, the average asking rent in Raleigh was $1,494, up 8.6% from a year earlier, per economic research firm Moody's Analytics.

The good news: In November, rents fell faster in Raleigh (1.3%) than any other large metro area. 

What's happening: Many would-be home buyers chose to rent longer last year, sustaining apartment demand, economists at Moody's Analytics say. But folks are hitting their spending limit.

What they're saying: Year-over-year rent growth slowed in the second half of the year across the board, "and we expect further deceleration as new supply makes it to market at the same time the labor market softens," senior economist Lu Chen tells Axios.

Zoom out: Rents are already falling in cities that were near the epicenter of the pandemic home-price boom, Axios' Matt Phillips reports, citing Realtor.com data.

What we're watching: New apartment construction. The expected surge in supply could help bring down prices.

Yes, but: Experts say most cities will "remain undersupplied with the kind of affordable units that see the highest demand," per The Wall Street Journal.

Raleigh rents are still high, for now

What's happening: Many would-be home buyers chose to rent longer last year, sustaining demand.

Rents in Raleigh are still much higher than they were before the pandemic. But since the second half of last year, they&#x27;ve been on a steady downward trajectory. By the numbers: In the fourth quarter of 2022, the average asking rent in Raleigh was $1,494, up 8.6% from a year earlier, per economic research firm Moody&#x27;s Analytics.

Credit line: Data: RentCafe; Chart: Tory Lysik/Axios Visuals

Apartment developers looking to attract high-income renters say they’re thinking beyond gyms and pools when it comes to amenities.

Why it matters: The push comes as many would-be homebuyers rent longer, incentivizing properties to compete for a growing cohort of high-income tenants.

By the numbers: The number of metro-area renters earning $150,000 or more grew 103.5% between 2016 and 2021, per U.S. Census data.

That's higher than the national average increase of 87.5%.

The share of renters making between $50,000 and $75,000, meanwhile, has grown at a far slower pace: 14.5% between 2016 and 2021. 

State of play: Luxury apartments at one of Raleigh's newest complexes, The Eastern, start at around $1,500 a month and cost as much as $13,000 monthly for a high-end penthouse. 

Apartments feature spa-like baths, nine-foot ceilings, customizable kitchens and include such amenities as an in-house spa and concierge services that offer pet arrangements and car detailing. 

The big picture: Apartment construction is booming nationwide. Historically, new rental housing tends to hit at the higher end of the market, Chris Salviati, senior economist at Apartment List, tells Axios.

That trend has become more pronounced in recent years as rising project costs squeeze developers, he says.

Between the lines: High listing prices and mortgage rates aren’t making home buying as desirable as it once was, Salviati says.

"A lot of folks in that high-income band, who in the past would have owned homes, are now continuing to rent — whether that's for lifestyle reasons or because they are feeling like it's not a good time to buy," he says.

Raleigh's growing share of wealthy renters

Many would-be homebuyers are renting longer, incentivizing properties to compete for a growing cohort of high-income tenants..

North Carolina

Apartment developers looking to attract high-income renters say they’re thinking beyond gyms and pools when it comes to amenities.Why it matters: The push comes as many <a class="gtmContentClick" data-vars-link-text="would-be homebuyers" data-vars-click-url="https://www.axios.com/2023/02/22/mortgage-applications-plummet" data-vars-content-id="ac4cbc54-91de-4d7d-a4da-9901fbb0b3fd" data-vars-headline="Raleigh&#x27;s growing share of wealthy renters" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/02/22/mortgage-applications-plummet" target="_self">would-be homebuyers</a> rent longer, incentivizing properties to compete for a growing cohort of high-income tenants.

Newcomers

Data: Point2Homes; Map: Tory Lysik/Axios Visuals

Raleigh renters earned 57% of the income they would need to afford a starter home, according to an analysis by real estate website Point2Homes.

Researchers considered "starter homes" properties valued in the lower one-third of all available homes for sale.

Why it matters: Higher mortgage rates and housing costs are keeping homeownership out of reach from many first-time buyers.

By the numbers: Renters in Raleigh earned a household income of $47,469 on average, while the income needed to cover a mortgage was $83,621, according to the study.

In September, a typical Raleigh starter home cost $323,877, the study found, analyzing Zillow data.

Zoom out: Following October's interest rate hike, renter households in 15 of the 50 largest U.S. cities made less than half the income needed to buy one of the cheapest homes in town, per the analysis.

The big picture: Across the U.S., the share of first-time home buyers has shrunk to a record low, according to the National Association of Realtors. First-time buyers made up 26% of all buyers in 2022, down from 34% last year, the group found.

Go deeper: 3 reasons it's getting harder for renters to buy 

Raleigh renters can't afford starter homes

Higher mortgage rates and housing costs are keeping homeownership out of reach from many first-time buyers.

Raleigh renters earned 57% of the income they would need to afford a starter home, according to an <a class="gtmContentClick" data-vars-link-text="analysis" data-vars-click-url="https://www.point2homes.com/news/research/starter-homes-where-to-find-them-entry-level-house-myth.html" data-vars-content-id="f78bc472-eb91-4062-b6d2-351cab91923b" data-vars-headline="Raleigh renters can&#x27;t afford starter homes" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.point2homes.com/news/research/starter-homes-where-to-find-them-entry-level-house-myth.html" target="_blank">analysis</a> by real estate website Point2Homes.<ul><li>Researchers considered &quot;starter homes&quot; properties valued in the lower one-third of all available homes for sale.</li></ul>

Sami Sparber

Featured stories

Triangle homebuyers flock to condos and apartments as housing costs surge

Built-to-rent housing is surging in North Carolina

Raleigh's growing share of wealthy renters

Raleigh rents are still high, for now

Raleigh renters can't afford starter homes