An article this week on Chapelboro.com discussed how supply and demand affects home prices in Chapel Hill. Seeing as how there is some debate on the matter, I thought I would give you my take.
Chapel Hill is... shall we say... hesitant about building new housing. Regardless of the reasons behind that hesitation, that's simply a fact. While that hesitation is good news for surrounding areas like North Chatham County that gets some of that spill-over demand, that doesn't address the issue that people still want to live in Chapel Hill proper.
Each sector of the market, from rentals to starter homes to luxury estates, has to keep up with its own sector's demand in order to keep prices from rising quicker than inflation (creating a bubble). When demand remains high and housing inventory doesn't catch up, the price of existing inventory goes up because people are willing to pay that higher price to live in that area. Building new apartments doesn't have much effect on the single-family housing market - only building more single-family housing.
This isn't a problem that's exclusive to Chapel Hill. There is a nationwide supply crunch and some towns (such as Raleigh) are doing better with making sure there is enough inventory to keep up with demand.
Supply and demand is just one factor when it comes to a home's price - but it's the largest. I'll be hosting some seminars around the Chapel Hill area in March and will explain in more detail what determines a home's price.