When will the Raleigh-Durham market cool down?

Durham, NC · Member since 2021 · 10 posts · 9 votes

Like all of us, I'm looking at investment properties around the Triangle (mainly SFHs that meet .70% rule, mainly for equity). I'm starting to expand my search because of how "hot" the market is.

When does everyone think this market will cool down in terms of being a seller's market? Or is this out of the question for the next, say, 5 years?

Happy to hear any and all opinions.

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Keon Garraway

Rental Property Investor · New York City · Member since 2017 · 34 posts · 30 votes

prices are going to keep going up because Apple is about to build a headquarters there, thereby bringing 3000 jobs. Now is the time to buy in Raleigh

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Keon Garraway
Rental Property Investor · New York City · Member since 2017 · 34 posts · 30 votes
5y
Originally posted by @David Ginn:
My professional guess is that once they start to open the market foreclosures start happening again, you're gonna see a large amount of inventory released out on the market and it will flip the market from where it's currently a low supply and high demand, it will then turn into a high supply the low demand, at which point the market will be in a fall position. That depends on when they release the foreclosures out into the market, because there is a large pent up shadow inventory being built up every month that the banks don't foreclose, which is restricting the inventories.

So I think that if foreclosures are released into the market, there's a large amount of shadow inventory, so supply will become greater than demand and the market will correct back. Based on current projections that could happen in Q3 2021, Q4 2021, or Q1 of 2022 is where you'll start to see it go off the cliff. Remember that most people want to buy sooner. This 3 recession has potential to be fairly deep. The longer the government props this thing up, the more the recession will last, the longer it will go. So one of the primary indicators is to watch as to when these guys lift the foreclosure restriction and they allow the homes to be taken to sale. The minute that happens at all these flippers out there will start buying that inventory and put it on the market, thus creating a greater supply, as opposed to what the demand might be.

Great analysis. Question, when the courts open up back and if a flood of foreclosures go through, wouldn't there be pressure on the federal government to have a refinance program akin to the TARP Program (Troubled Asset Relief Program)? I also foresee state legislatures being pressured to also come up with their own program. Because of this and the opening back of the economy, I do not see prices dropping significantly, and for areas such as Raleigh I see prices increasing to match the economic forecast of Google and Apple having campuses there.
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Nick Schultz
Contractor · Raleigh, NC · Member since 2020 · 37 posts · 14 votes
5y
https://finance.yahoo.com/news...
Raleigh is the 3rd most competitive housing marking in the US! As a native to the area, it is astounding to think that it is harder to buy a home here than LA, San Diego, or Portland. My partner is an agent and regularly hears of houses selling for 25% (50-60k) over asking and due diligence money at up to $100k. It seems to be a factor of the population migration from higher priced markets (NY/CA) who view the current prices as "affordable." The trouble is a lot of middle class and/or first time home buyers are getting priced out of the market. Impossible to predict when the market will settle down unless you're Michael Burry.
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Nick Camizzi
Garner, NC · Member since 2021 · 45 posts · 33 votes
5y
Hey Everyone, I’m from the Raleigh area. I am new to this & still learning & probably will never stop learning. Im looking at commercial real estate. Would it be better to find investors first tell them what I’m looking for, then when I find that deal I have investors in place or first find the deal then find investors?
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
5y
Originally posted by @David Ginn:
My professional guess is that once they start to open the market foreclosures start happening again, you're gonna see a large amount of inventory released out on the market and it will flip the market from where it's currently a low supply and high demand, it will then turn into a high supply the low demand, at which point the market will be in a fall position. That depends on when they release the foreclosures out into the market, because there is a large pent up shadow inventory being built up every month that the banks don't foreclose, which is restricting the inventories.

So I think that if foreclosures are released into the market, there's a large amount of shadow inventory, so supply will become greater than demand and the market will correct back. Based on current projections that could happen in Q3 2021, Q4 2021, or Q1 of 2022 is where you'll start to see it go off the cliff. Remember that most people want to buy sooner. This 3 recession has potential to be fairly deep. The longer the government props this thing up, the more the recession will last, the longer it will go. So one of the primary indicators is to watch as to when these guys lift the foreclosure restriction and they allow the homes to be taken to sale. The minute that happens at all these flippers out there will start buying that inventory and put it on the market, thus creating a greater supply, as opposed to what the demand might be.
Summary: I disagree with the premise that inventory will rise, once, as you say, "foreclosures start happening again."
Since this post is on the Raleigh Real Estate Forum and because you didn't cite any references, I'm curious where you get the data to support your opinions? Can you quantify what you identify as "a large amount of inventory released out on the market"?
I looked at as much data as I could find; SEC filings, Wake county records, demographics, loan data, commercial lender disposition, etc.
Based on the facts I see, I just don't anticipate a massive deluge of foreclosures on the horizon, specifically not in Wake county. County data supports this position, per this image of 2019 an 2020 S-TR and FORE filings. I'm not going to repeat the SEC filing and county data facts here, but I posted details on this BP topic (post is toward bottom of page 3): Fannie Mae tightens lending standards on Investment Homes

Using the quarterly differences between on 2019 foreclosure counts (recorded counts) vs. 2020 foreclosures, the "pent up" opportunity (the Serviceable Available Market) in Wake county is on the order of a few hundred properties.
My conclusion: The small quantity of Wake county courthouse sales will not lead to a material change in inventory, especially since a large percentage of property becomes 'held for investment' vs. 'held for sale'.
Sidebar:
I decided to look at some recent foreclosures (resulting from courthouse sale, specifically MERS serviced) via recorded docs rather than from the special proceedings room. I got to ONE recorded foreclosure filed recently and that was enough. The subject I looked at had an original loan of $126,600 and sold at the steps for $300,100. The buyer of this duplex has a history of buying for rental purposes and the probability is that this property will not become selling 'inventory'. (I did the redaction of names and file #, but the document is public information.)
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Account Closed
Real Estate Agent · Durham, NC · Member since 2020 · 16 posts · 4 votes
5y
Also Real Estate lags behind the economy....so if the economy does dip, Real Estate will still be strong, for possibly even 12 months, after an event.
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Leo Croes
Contractor · Raleigh, NC · Member since 2021 · 15 posts · 6 votes
5y
My thoughts are even if there’s a recession. The fact that RTP keeps bringing in jobs and companies want the talent coming out of UNC, Duke and NCSU will keep the market hot for a long time. Plus the worse hit the high tax/high income areas are by poor central economic planning the more people from those area will continue to see the triangle as a refuge. I fully expect at least another decade of growth before any cooling occurs
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