"Under $300,000": Entry-level homes too expensive for first-time buyers in Triangle (2023)

On a sunny day in early May, Brandon Thomas and his fiancée Colleen Enloe set out to find a home in the triangle.

They are both 23 years old, have just graduated from college and are not typical first-time homebuyers. Most Gen Z or Zoomers (aged 18-26) reach adulthood and establish themselves in the workforce. Only 29 percent currently own a home in the Raleigh Cary market.A recent studyfounded.

The couple wanted to be at the forefront.

Since they met on a cruise when he was 16, Greensboro native Thomas has said he's saved for a down payment on a new house, taken a tractor to horse shows, and run his own eBay shop on the side.

He graduated with a mechanical engineering degree from North Carolina State University this month. Since June this year he has found work at the John Deere manufacturing plant in Fuquay-Varina.starting salaryThe company's product engineers usually start withabout $84,000a year. Enlow can expect to make $40,000 as a beginner teacher. Without their parents' help, they received up to $410,000 in pre-approved loans from the John Deere Credit Union. They hope to find a three bedroom house to live in.

“You can always refinance with the interest. The main thing is the price of the house,” said Thomas. "I don't want to pay twice what the house is really worth."

This spring, Thomas and Enlow joined a growing number of first-time buyers returning to the Triangle real estate market after more than two years of sky-high house prices. However, during home sales in Wake Countylet it cool down slowly, they soon found that options were few and they faced stiff competition.

“Absolutely not, especially if you have less than $300,000. If there's a good offer, it's gone the same day. Or you need something big,” said Thomas.

"Under $300,000": Entry-level homes too expensive for first-time buyers in Triangle (1)

They visited three houses that day: the first in Ghana smelled of dried rot; The second Clayton case involved a concrete pit several feet thick with no access to a septic tank. the third, also in Clayton, has not been updated for more than 20 years.

In the end there was no offer. "It pains me to know that prices have gone up," Thomas said, shaking his head. “Five years ago the house sold for $150,000. Now they want $325,000. It's a good deal in this market, but it's still terrible."

Four days later they made an offer for a house in Holly Springs. It was $46,000 over the asking price and $15,000 over due diligence. It was rejected. You already have new ideas about home ownership.

"The buying decision became increasingly unclear," Thomas said after looking at the houses for a few weeks. "I'm sure I have more questions about that."

"Under $300,000": Entry-level homes too expensive for first-time buyers in Triangle (2)

new normal

Across the triangle, house prices increased by 22.2% between June 2021 and June 2022Highest average price of $430,000.Since North Carolina still existsone of the fastest growing statesBid fights are commonplace and will weed out most first-time buyers who can't keep up with overbids, cash offers and high due diligence fees, real estate agents say. Then last spring, mortgage rates doubled in a matter of months, cooling the market but further shutting out potential buyers.

In the United States, the percentage of first-time home buyers has fallen to an all-time low, according to statisticsNational Brokers Association(nar). The group found that first-time homebuyers accounted for 26 percent of all homebuyers in 2022, up from 34 percent the year before. Many also take longer to get enough money together for a down payment. The typical age of the American buyer is 36 years, a record.

“When interest rates rose, everyone was stunned. Nobody knew what to do," said Corey Sherman, a broker at Homegrown Real Estate in Durham. But he said early homebuyers are beginning to come back. "It's like the shock has worn off a bit. We are in the new normal.”

Inventory continues to rise (up 51.2% year-over-year in April) and new home sales in Wake County are up 13%, compared to an overall decline of 21%.the latest dataBrought to you by Triangle MLS (TMLS), a Cary-based property listing platform. Houses also stay on the market longer. In March it was 21 days, in the previous year it was 9 days.

This is great news for buyers. With more homes on the market and less competition, many feel they have greater bargaining power. Cash offers remain in place, but sellers are increasingly paying closing costs to close deals, analysts said. Some also offer mortgage repurchase agreements, which offer borrowers a lower interest rate for at least the first few years of the mortgage.

"We've been doing this since August and it's opened a lot of doors for first-time buyers," said Colleen Blondell, owner of Blondell Properties and a board member of the Raleigh Area Association of Realtors. "I just saw a big opportunity."

But it also depends on where you look. Conditions remain difficult, particularly in popular markets such as Cary, Apex and North Hills, as well as certain parts of Durham and Wake Forest.

"We have a lot of submarkets here," said Stacey Anfindsen, an Apex evaluator who analyzes MLS data. "We still have several listings in certain submarkets and homes that are selling above list price, but the percentage isn't nearly as high as it was in the first and second quarters of last year."

"Under $300,000": Entry-level homes too expensive for first-time buyers in Triangle (3)

The market is definitely more affordable, but buyers still need to be open and flexible and even a little belligerent to be successful, said Tammie Harris, managing broker at Tammie Harris Real Estate in North Raleigh.

"They had to get creative, from townhouses to modular homes to double-wide brick mobile homes and some older neighborhoods where they had to fix houses."

They would also need to broaden their search, he said. With prices outside of the city center, many look to smaller regional cities like Clayton, Wendell, Zebulon and Franklinton to find deals at their prices.

"It's still happening, but it's further away. You can't do that in North Raleigh or North Hills.”

Still a seller's market

Even though selling prices have flattened both in the triangle and across the country, they are still high. triangularaverage selling priceApril sales were $415,000, according to TMLS. It rose 7.2% sequentially but fell 2.4% year-on-year, closer to the historical trend.

NAR chief economist Lawrence Yun said the recent price drop was temporary. He expects sales of new and existing homes to bottom out in 2023 and "pick up again in 2024."

But even if prices didn't rise this spring, buying a home in the triangle is still a lot more expensive today than it was a few years ago. Interest rates are well above 6%. At the end of May, it was 6.35 percent, according to the data, up from 5.3 percent a year earlier.Freddy Mac.

For many first-time homebuyers, "it just comes as a real shock," said George Linney, a loan officer at CIMG Residential Mortgage in Raleigh.

Secure a mid-range home today with a 30-year loan with a 20% down payment. You're paying about $868 more per month than if you bought the home in March 2019, when the median price was $269,900 and the interest rate was 4.06%. So your monthly payment is about $1,038, including principal and interest. Today the payment is about $1,900.

Even if mortgage rates fall closer to the 6 percent mark by the end of the year, homebuyers shouldn't expect to return to the 3 percent interest rates that have fueled home buying frenzy during the pandemic, Linney said. "I don't think that's going to happen. It's a bit like the COVID anomaly.”

Matt Fowler, chief executive of TMLS, said that while inventories are slowly rising and the market is beginning to normalize, the triangle still faces a severe housing shortage.

At the end of April, the Triangle had 1.5 months of inventory of homes, while Wake County only had 1.2 months. In a healthy real estate market, it's more of a four or five month supply. In particular, homes priced under $345,000, which he says are the triangle's "starter home," are rare.

Recent mortgage rate adjustments could improve the situation, but it remains a challenge, he said. Due to the ongoing housing shortage, especially affordable housing, he does not expect large price movements.

"With the average home price in most areas being $300,000, there are very few options," Fowler said. "The interest rates also make it difficult to qualify. "

Is it better to rent?

For many potential homebuyers, these conditions have kept them in the rental market.

Teacher Stacy and chef Jonathan Overby work at First Presbyterian Day Care in Durham. For five years, they've rented a $900 double-wide prefab in Henderson, driving about 80 miles a day. They've received conditional approval to buy about $250,000 worth of homes, but it's hard to find anything at that price. They called off their search this month when conditions at the rental properties deteriorated and they were forced to seek emergency shelter.

"I blamed myself," said Stacie, 50. "I feel like if I had done it earlier it would have been a lot easier (home ownership)." Jonathan, 43, added, "It's almost like that like there's no hope."

rent increasecomplicates matters, said Derrick Thornton, a real estate agent at Coldwell Banker Advantage in northeast Raleigh. many people end up in itHarvest them— They cannot save for a down payment because they pay too much rent on top of their income.

"Black or Hispanic families are likely to be hit the hardest," he said. “The income of these households is not increasing nearly as much as the value of the houses. It is not enough to reach the average price of houses.”

Millennials in the area are also staying in rentals longer. Despite a 73% increase in home ownership over the past five years to a peak of 101,230 millennial homeowners, only 45% of this age group now own their own home, bucking the national trend.majority tenant generation..

Another possible reason for so many tenants? TheMore and more popularThe “rent your choice” lifestyle. In Raleigh, the number of “affluent” rental households earning more than $150,000 a year increased 178% from 1,877 to 5,224 between 2015 and 2020.RentCafé investigationreports.

"Home ownership is not a priority for everyone, especially millennials and Gen Z," said study author Andrea Neculae.

Complete the contract

This is not the case with Carolina Acuipil and Carolina Rancano. The couple, who are originally from Buenos Aires and have a four-year-old daughter, moved to the triangle about a year ago for work reasons. Both are doctors in their early 40s. They have rented a four-bedroom house near downtown Cali for $2,900 a month but would rather own their own home and entered the market this month. They're looking for Cary because of school.

"Under $300,000": Entry-level homes too expensive for first-time buyers in Triangle (4)

A four-bedroom, three-bathroom transitional home was on the market in Cary this month for just under $600,000 after several homes were outbid. They jumped at it even though it didn't have everything they wanted, such as: B. natural wood floors, and it was only 1% above the asking price. His proposal was accepted.

"Under $300,000": Entry-level homes too expensive for first-time buyers in Triangle (5)

from Argentina, where the inflation is aboutamazing 97%, Good business. “Most young professionals cannot afford a house (over there). That's not an option," Acuipil said. "It was a great experience for us."


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