You've heard me say time-and-time again that the Raleigh area is in a red-hot seller's market and how there simply isn't enough inventory to satisfy the demands of all the buyers out there. But, why is that?
It's a problem that has a handful of reasons - not just one.
1. Land is Expensive
As with most urban areas, there isn't much empty land. After all, it's 2016, not 1816, and we're reaching the limits of how "far out" people are willing to live from urban centers. Adding to that is the geography of the Triangle. Land is cheaper on on the fringes of urbanized areas; but if you consider how close Raleigh, Durham, and Chapel Hill are to each other, there isn't too much "fringe" to be had. Much of that has already been taken by RTP or by Falls Lake and Lake Jordan.
Builders also roll the cost of the land into the cost of the home. More expensive land = more expensive home, so an $80,000 lot could have a $400,000 home while a $90,000 lot with the exact same home could cost as much as $450,000.
Bigger lots = bigger houses = bigger sales prices
2. Cities are wanting less density.
Fewer homes per mile reduces stress on not only utilities but also other city services like police, fire, and EMS coverage. New schools cost millions and local governments can't build those schools without raising taxes - which rarely goes over well.
3 Mortgage Rates Are Low.
Not just low, but historically low. You can get a new 30-year fixed-rate mortgage for just 3.5%. That means you could get a $400,000 home for only $1740 per month (with 20% down). When rates are closer to 4%, like they were a year ago, that same house would cost you $1830 per month. Ten years ago when rates were in the 6% range, it would be a whopping $2300/month.
4. Mortgages Are Easier to Get.
Right after the bubble burst, banks were suddenly not as generous as they were before (when almost anyone could qualify for a mortgage). For the next five years, more paperwork was required, more background checks were conducted, and higher credit scores were needed to qualify. It was too much for many potential buyers but a necessary evil.
Most lenders have relaxed those insane credit qualifications, so now you can have a couple of dings on your credit report and still get a pretty decent rate.
When you combine all these factors, it's a perfect storm for sellers - especially those just entering the housing market with those mortgages. "Affordable" entry-level homes are getting snatched up at a record pace causing inventory levels for homes under $300,000 to be at less than 1-month throughout the Triangle.
If you're movin' on up, there is better news: $400,000-$600,000 homes are sitting at 5 months of inventory while upper-bracket homes in the $600,000-$800,000 price range are looking at 10 months of inventory.
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