Home prices have been dropping in Raleigh. Though prices are still up 9% year-over-year, properties are spending more time on the market and the number of homes sold is declining—down 40.6% from last year. In fact, homebuying competition across the country has dropped to its lowest level in two years. Why? High mortgage rates have priced many buyers out of the market, which in turn has caused more sellers to lower their prices.
While the change in prices and increase in listing days are good signs for buyers looking to break into a market that’s remained airtight for a long time, buyers are still facing high housing costs (both in Raleigh and nationwide) that outpace household income, resulting in an overall increase in the cost of living. Let’s break down what this means and where things are headed:
The good news? Raleigh still boasts a lower cost of living compared to the rest of the U.S.
If you move to Raleigh, you’ll find that your paycheck goes further. The cost of living in Raleigh is 7% lower than the national average. Utilities here cost 3% less, groceries cost 13% less, and even with rising home values, housing still costs 9% less than in the rest of the country. Even better? The average household income is 3.2% higher in Raleigh than in the rest of the U.S. The 2020 U.S. census reported that the U.S. median household income was $67,521, while Raleigh’s was $69,720.
But what about inflation?
The Wall Street Journal recently reported that “vast numbers of Americans find their cost of living is rising faster than the income they’re bringing home.” To put it simply, wage growth hasn’t kept up with inflation.
The Consumer Price Index (CPI), the number used to gauge inflation, has been surging since the onset of the pandemic. In September 2022, the U.S. Census Bureau released income and earnings estimates for 2022. According to this index, prices increased by 4.7% between 2020 and 2021. This is the largest annual increase in the inflation rate since 1990 and the final tally from 2022 is expected to be even higher. In fact, 53.4 percent of all workers are experiencing real wage declines due to inflation, and forecasting firm Markerr reports that effective real income—individual wages adjusted for inflation—was down -3.4% YoY in mid-2022. Their data also found that the average monthly cost of a single-family home in the U.S. is now 56.3% of a household’s monthly income—an enormous ratio, given that most financial advice suggests housing should be no more than 28% of the household income
Currently, the Home Price to Median Household Income ratio is higher than it’s ever been, according to this graph from Longtermtrends.com:
Experts recommend that your housing costs should eat up no more than 28% of your monthly budget—but that's not the reality for most people. For example, if you compare the median home sale price of $400,00 in Raleigh to the current median salary of $74,612, you'll see that the mortgage payment would take up 40.9% of the average person's budget. On the plus side, Raleigh's monthly mortgage cost-to-income ratio is 15.4% more affordable than in the rest of the county.
Hope for the future? Raleigh’s economy is booming.
Though income and earning power might be stagnant in the rest of the country, Raleigh is quickly becoming one of the top cities for industry and professional development, with North Carolina recently ranked the #1 Best State for Business. If you're looking to build your career and achieve more salary growth potential in the future, Raleigh is the place to be. With one of the strongest economies in the nation, major companies like Apple, Toyota, and Amazon are expanding in the Triangle, creating jobs and attracting top talent.
In 2022, Raleigh has received multiple top rankings, including the #1 city for working women, the #4 state capital for economic well-being, and the #3 hottest job market in the United States. If you're interested in a high-paying technology job or starting your own business, there are many opportunities to pursue in Raleigh despite the pinch of inflation.
Yes, Raleigh is a great place to ride out inflation while preserving your wealth
According to the October 2022 State Inflation Tracker, prices in North Carolina are up 14.7% since January 2021. That may sound like a lot, but it’s about 2% less than inflation in western states, or a difference of $226 in monthly inflation costs.
Demand for housing in Raleigh will undoubtedly increase due to the area’s robust economy and job opportunities. Unemployment is at a low 3.5% rate, and job growth potential has resulted in the city being named the #3 hottest job market in the United States.
Think Raleigh might be right for you?
If you’re ready to make the move to Raleigh, let The Coley Group help. We have over two decades of experience buying and selling homes in the Triangle, and we have what it takes to land your dream home or find that perfect investment property. Fill out the form below and we’ll contact you to get started.
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