Triangle Real Estate Outlook: Rent continues to rise in Raleigh

Three local industry leaders have given the Triangle Apartment Association a rosy picture of the year ahead for landlords, predicting at the group’s annual conference last week that rental prices will likely continue to reach new highs this year.

“I mean timber prices are hitting the ceiling, and every other element that goes into those multifamily units has gone up, especially the land,” said John Linderman, regional sales and leasing director for commercial real estate firm Avison Young.

About five years ago at this time, a one-bedroom apartment was renting for less than $1,000 in the Raleigh Carrey metropolitan area, according to an analysis of apartment listing data. In early 2021, they were going for about $1,100. Last month, the average price was $1,343.

That’s a 35% increase in five years, most of it accumulating since the start of 2021. It’s an explosive rate above the national average, which the apartment listing estimates to be closer to 26% over the past five years.

Unless companies decide to take a lower rate of return on their rental investments, Linderman said, prices will continue to rise.

Economist Michael Walden, a newly retired professor at North Carolina State University, said the Triangle economy is back in good shape after the short recession caused by COVID-19 and rental prices are likely to continue rising.

“I can’t think of a better place to be in the States than here,” he told the crowd. “All expectations are very positive for this region.”

“We’re crushing on it in North Carolina,” Linderman said. “This is where people want to be.”

Linderman said some companies had avoided the area before the pandemic because mass transit options were lacking and there was no dense urban core like competing cities. COVID-19 has changed those priorities.

“We’ve become a bigger place to do business during the pandemic, because of who we are, who we are, the diversity we represent, and the education we represent,” Linderman said.

Walden said it’s encouraging to see companies like electric car maker VinFast investing in counties on the edge of the triangle.

“That, to me, is positive because it could mean we can focus more on growth…from the core counties in the Triangle where home prices are rising to surrounding counties where home prices are more moderate,” he said.

Inflation and interest rates can eventually lead to a “market correction” for rent

Vacancies in rental apartments are declining, fueling the price hike.

Occupancy – for the first time ever – reached 97% across the region. Over the past five years, we’ve exceeded 95%. “We never got to 97%,” Linderman said.

“It’s unheard of,” said Ashley Rogers, senior market analyst at real estate research firm CoStar Group, noting that rental companies were making far fewer concessions to attract tenants as a result.

With monthly rent approaching the cost of a mortgage, Linderman noted, down payments were all that stood in the way of many potential homebuyers.

“A lot of people don’t have an $80,000 home check, so they’re at your door renting an apartment, paying whatever you say they need to pay,” he said with a laugh.

However, Walden cautioned that inflation is something to watch. The Federal Reserve voted last month to raise the benchmark interest rate for the first time in three years in an effort to rein in inflation.

“If you pressure me, I’d say the odds of a recession later this year are between 25% and 33%,” Walden said. “But it is something you should have on your radar screen. Something you have to be prepared for. You are in an industry where borrowing money is very important, where business expansion is very important. And if we have a recession, borrowing is going to be more expensive.” “.

Rogers agreed that a market correction was possible.

“Long-term inflation pressure as well as stagnating wages, is what might, I think, cause a correction,” she said.

This story was originally published April 5, 2022 11:12 am.

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Mary Helen Moore covers real estate and business for The News & Observer. She grew up in eastern North Carolina and attended UNC-Chapel Hill before spending several years working for newspapers in Florida. Outside of work, you may find biking, reading, or flirting with plants.

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