Renters are Reshuffling
sJust over a year ago, Zillow’s CEO identified the COVID-19 pandemic’s effect on American’s housing priorities as “The Great Reshuffling.” The virus completely reoriented how we live and work, from what is now known as the Work from Home Revolution to cutting-edge viral eradication technologies being integrated into home & office construction as the new standard.
Now on the other side of initial vaccine rollouts, and well into a Delta variant contagion, the economic effects of the last year and a half are coming into focus. With every economic upset, society further stratifies between the “haves'' and the “have-nots,” so to speak. Those with financial resources to weather the fiscal storm do so with aplomb and come out the other side secure in their housing, income, and health. Those without fall further from a middle class life, exposed to insecurity and anxiety in those three aforementioned categories.
As heavy-hitters like Apple and Amazon bring their operations to Raleigh-Durham, the Triangle becomes a hotter and hotter place to live. Folks follow jobs working for those companies, and trailing not far behind them are those working to service those who work for big companies: hairdressers, dry cleaners, restaurateurs, etc.
Our population continues to grow as out-of-state license plates are exchanged for those reading “First in Flight”. All these people need somewhere to stay once they get here - they can’t all crash on a friend’s couch forever. Building new houses is slow and expensive. Re-sale inventory seems to hit an all-time low every week (at the time of this article’s writing, TMLS “Active” inventory is 2,588, less than half the daily average inventory pre-COVID). What are these new residents to do?
Let’s say you are an Apple employee moving to RTP to work on their new campus. You’ve weathered the pandemic as best you can and are looking forward to new opportunities in the growing Triangle area. You don’t yet have a down payment saved to buy your own home - or maybe you aren’t sure if you’ll be here long enough to make a purchase worth it - so you decide to rent a home for you and your family the first year you are here.
Don’t fancy a desk job? No problem. Let’s say you are a restaurateur bringing your food and entrepreneurial skills to the area. Until your new place makes it big, you can’t afford to buy a home in the city, so you look at available rentals nearby. You aren’t the only one doing this, so competition is stiff.
I could go on and on, but you get the picture. Home prices, as well as due diligence fees, have skyrocketed since 2020, making home ownership that much more rarefied. Large amounts of cash reserves are needed to buy property, so those without are turning into renters where, before the pandemic, they may have been able to climb on the property ladder with only four figures down.
As those with disposable income realize which way the wind is blowing, they are buying up all available real estate and adding it to their rental property portfolio. Apartment buildings are being bought up by California corporations. Townhomes and single family homes are competed over by corporate and individual investors alike, all with the same goal: holding onto the home and renting it. With interest rates so cheap and rental prices creeping up, it’s even easier to turn a profit on an investment property.
What Does This Mean for the Future?
Raleigh has always aspired to be another Austin or Atlanta. Major real estate price increases help us do this - we now can count ourselves among U.S. cities that are nearly impossible to buy back into once you sell and move outside of the city limits, like Atlanta or Austin. Homeowners in the city limits are of a rarified class in their ability to afford in an unaffordable area.
Societal stratification along economic lines will continue as those with the resources to continue to purchase available real estate in the area. Property ownership per capita will decrease as the number of renters increases. Just in my own neighborhood, I’ve seen a 10% increase in non-owner-occupied homes since this time last year, and we are not an isolated case.
Growth is the name of the game now. Bigger and bigger business entities are going to continue buying up housing to have it available to rent to the public for that sweet, sweet passive income stream.
If you can get in on this ground (well, second) floor and want to, now is the time. I don’t know how long it will be until inventory hits a new all time low and opportunities almost cease to exist. As Apple and Amazon continue to make moves to bring their business operations to the area, I will be closely monitoring its effects on local real estate.
Again, now is the time to invest in local real estate! If you were unable to invest during the economic hardships immediately following the COVID-19 pandemic in 2020 and can now, make some moves before it’s too late and you’re beat out by corporations with seemingly bottomless pockets. No one can dispute the benefit of renting locally owned property over that owned by a large business.
Jessica Mohr is a licensed real estate broker working in her hometown of Raleigh, North Carolina.