How Will Apple’s New Campus Impact Real Estate in Raleigh, NC?
Raleigh’s real estate market was already booming long before Apple, Inc. announced its plans to open an east coast campus in North Carolina’s Triangle region and bring 3,000 jobs to the area over the next five years.
Now the Raleigh metro area and its real estate market are experiencing insane amounts of activity to accommodate the current demand and future need. The Raleigh-Durham area is in the middle of a construction boom as the real estate market works to catch up to the demands of buyers. Raleigh’s red-hot housing market saw another surge of activity in March, despite a steadily shrinking inventory and increasing prices. Median single-family home prices have increased, while the supply of single-family homes has decreased by nearly 73% YOY.
Raleigh Real Estate Market Stats:
- Population: 483,579
- Median single-family home price: $329,000
- Housing inventory: 0.6 months’ supply
- Median days on the market: 14
The good news for buyers is recent real estate listings have increased 25% over the past year when we were at the forefront of the pandemic. The rental market has not experienced quite as much insanity – yet. The average monthly rent in Raleigh has increased from $1,232 to $1,274 YOY. Renter occupancy has increased slightly in the Raleigh market, which has stable numbers and should not have much of an issue after the pandemic eviction moratorium expires. All signs point to escalating rates as more and more white-collar professionals relocate and call Raleigh home.
Raleigh New Home Construction
New construction permits in Raleigh have skyrocketed 39% collectively. Single-family housing permits have increased 37%, while multifamily permits have increased 43%. These increases are the main reason why Raleigh is seen as one of the top national markets for development activity. Despite the significant increase in new construction permits, Raleigh is feeling the effects of the nation’s tight housing inventory, supply delays, and rising costs of lumber and materials. Chip Bishop, general manager of Robuck Homes in Raleigh, recently told WRAL that the company had 27 available lots but only sold 14 because they couldn’t keep up with the demand and rising materials costs.
“The roofing, the windows, the siding, the framing, the insulation, the drywall especially — every single part of that home has jumped in price,” Bishop said.
Shortages and delays haven’t kept the Raleigh area from experiencing record-setting growth. The Mortgage Bankers Association expects mortgage originations to grow by more than 16% in 2021 – a record rate. Many of the home buying trends creating this demand can be seen across the U.S., but some of them are specific to Raleigh, which means the city is poised for continued growth. So, why is Raleigh so hot? Here are four trends driving growth for the city:
Historic low mortgage rates
- Mortgage rates hit an all-time, historic low as the pandemic forced the country to stay put. Low interest rates helped first-time homebuyers significantly by creating the opportunity for more affordable monthly mortgage payments.
Millennials in the market
- The National Association of Realtors reported that millennials are now the largest group of homebuyers in the country. As first-time homebuyer programs enter the market in 2021, the number of millennial buyers is expected to grow substantially.
- There’s a nationwide housing and materials shortage, which has made it nearly impossible to keep homes on the market for any length of time. In Raleigh, homes are on the market an average of 14 days. New construction will be an integral part of correcting that shortage as Raleigh continues to grow.
New jobs and opportunities
- The Urban Land Institute and PwC ranked the Raleigh-Durham area the no. 1 real estate market because of its real estate prospects, which are partly driven by job prospects. Major tech companies like Google and Apple, as well as new biotech companies and startups, are gravitating toward the Research Triangle Park area because it is business-friendly and affordable.
Apple’s East Coast Campus
North Carolina has been courting Apple for more than three years in an attempt to become the home base for the company’s east coast campus. In April, the company announced it will invest $1 billion in North Carolina over 10 years, including $552 million to establish its east coast campus in Research Triangle Park. It’s a huge win for North Carolina’s real estate market.
The new campus will create an estimated 3,000 high-paying tech jobs, including software engineers. This campus is in addition to the $1 billion Apple campus in Austin, Texas, expected to open next year. During the pandemic, many companies were forced to make adjustments so their employees could work from home. Apple’s expansion plans are interesting in that the company is perhaps more suited than most companies to maintain a remote work setup.
It’s also worth noting that Apple is setting up office space on the opposite coast from Silicon Valley which has long been home to major tech companies. Apple’s expansion should give real estate investors reason to believe that office buildings have the potential to stage a comeback.
How Apple Could Impact Raleigh
As Apple gears up to make its debut in Research Triangle Park, the Triangle’s housing market is bracing for another influx of highly-paid professionals searching for homes in an already tight market, creating concerns that the sky-high housing prices and severe home shortages in Silicon Valley could surface in Raleigh.
Apple plans to employ an estimated 3,000 people with average salaries of $187,000. New construction in Raleigh, North Carolina is already experiencing issues meeting buyer demand – as is the city’s single-family rental market. The company’s future employees are expected to create a surge of homebuying activity where existing buyers are already struggling to find homes in a market with very little supply. Raleigh is struggling to keep up with the population growth it has experienced in recent years. Tech companies like Red Hat and Citrix brought thousands of jobs to the area, adding more high-paid workers to an area still growing after a biotech boom in the early 2000s.
The result: a rapidly increasing population and a housing market that can’t keep up. In an interview with U.S. News & World Report, Samuel Gunter, interim executive director of the North Carolina Housing Coalition, said, “Wake County is adding 64 people a day, so the market is changing rapidly. What used to be a pretty affordable market is no longer that way.”
In Raleigh, new homes are being built at a much higher pace than many of the established tech hubs on the west coast, but most of them are out of reach for existing residents.
“While rents and mortgages are skyrocketing, our salary numbers are pretty much flat,” Gunter added. “So folks who have been here who aren’t getting a six-figure tech job, their wages stay pretty much the same, but the housing market they’re pretty much priced out of.”
Real estate experts believe that prices are going to increase considerably. Jon Tennant, a Raleigh real estate broker, told CBS17 that the city’s housing inventory is now what it was 30 years ago, but the population 30 years ago isn’t anywhere near what it is today. Many residents have relocated to the surrounding communities outside of the Research Triangle because of the spike in home prices and high demand, which will likely increase with the arrival of 3,000 highly paid employees.
Raleigh Mayor Mary-Ann Baldwin recently told WRAL that concerns about affordable housing aren’t going unnoticed.
“First off, this is a 10-year plan, so it’s not like Apple’s going to come in tomorrow, and a year from now, something is going to be built,” said Baldwin. “We have that time [to] also build up housing supply already started. We already started that process, and we will continue to be diligent about that.”
What Does This Mean for Real Estate Investors?
Permit and construction activity in Raleigh has increased dramatically in the past year, making it one of the top new national destinations for development activity.
The Raleigh metro area is projected to add 269,000 residents by 2030. The population is predicted to be 1.5 million in 2021 and 1.77 million in 2030. An estimated 7,600 – 8,600 additional housing units will be needed in the market. Raleigh is at the top of the nation’s new construction opportunities when it comes to real estate. Along with companies purchasing single-family homes to rent out in the area, single-family new construction homes are in high demand. Single-family rentals and build to rent homes are also great investments for investors interested in the Raleigh real estate market.
Investing in Raleigh’s Real Estate Market
While inventory might be harder to find, investors with strong real estate investment strategies can still profit. It’s more important than ever to have a lender capable of helping you:
- Secure a loan with the best price and maximum leverage for your next rental investment
- Close properties quickly and certainly
- Run your construction or rehab projects smoothly
Lima One Capital offers that and much more for real estate investors. We are experts in financing new home construction for builders on urban in-fill, spec homes, model homes, and teardown/rebuild projects. Our team of experienced professionals will help guide you through getting a new construction loan for your next investment.
If you’re interested in obtaining a loan for investment property or new construction in Raleigh, North Carolina, call us to learn more. Get started today and scale your rental property portfolio with Lima One, the nation’s premier lender for real estate investors.