Is it a great time to buy Real Estate in Raleigh, NC

As a real estate professional, I have been asked this question time and time again. Is is truly a good time to buy real estate or not?

The answer to this time honored question that has been plaguing potential home buyers for many years has a very delicate answer. It depends!!!

You may wonder why I am saying that it depends, but truly, it depends on the individuals personal situation.

First of all, everyone should ignore the national media with the doom and gloom coverage of the real estate market. If you notice, that the guest for these national shows usually does not include a real estate agent. What types of guest do they have for their shows? Financial planners, stock brokers, national builders are among the top guest for these shows. Financial planners and stock brokers want you to invest in the stock market so they have a vested interest in you giving up on the real estate market. These national builders are more viable guest for this subject, but even they tend to be more concerned about their stock prices and designing a reason why their company's stock may be down at the time. What better reason for a builder's stock to be down than the housing market slump? I am not saying that this is always the case, but often times, their stock price is down because of poor business decisions to overbuild is certain markets too quickly. In the Triangle market, we had a record year for transactions in 2006 and thus, many builders became cocky that the situation would continue unabated. Furthermore, many areas in the country had record transactions last year which has fed into this overproduction of products.

It Depends

Whether or not to buy now depends on many internal reasons that have nothing to do with real estate. It is my personal opinion that, from a purely financial situation, it is always a good time to buy real estate. However, the answer to this question for you is a personal one depending on your situation.

1. Credit Rating. It is no secret that many people in Raleigh have credit issues that will make it more difficult for them to buy a home for the lowest rates available. If your score is too low, you may not be able to get a loan these days with the failure of the sub-prime mortgage markets. In fact, this section of the mortgage market has failed in part due to the number of home buyers who should have improved their credit before purchasing a home, thus avoiding these types of loans that have the highest interest rates. A low credit score also hinders you in more than one way. It limits your negotiating position on a home to get the most for your money by forcing you into homes where the sellers are willing to pay the closing cost in exchange for a full price offer. In addition to this, these buyers often are forced to buy homes that they may not want due to the high interest rates and the debt vs. income ratios. It would be much better for these potential buyers to pay off some of their debt, improve their credit scores, and work on generating down payment money.

2. Length of Stay.

It is no secret that most home buyers are in their home for 5 years or less before selling their home here in Raleigh and the surrounding communities. This does not always bode well if a buyer needs to have a 100% loan. In this situation, the buyers are betting that the house will appreciate enough in the short term to allow them to purchase a larger home and pay all closing cost. Historically, the Raleigh market has supported this increase in value, but not always and for every corner of Wake county. Some parts appreciate better than others and there are no guarantees that last year's performance will be applicable to the next year's performance. Other outside factors may cause the area to appreciate faster from year to year. For instance, the past few years have seen great appreciation for Briar Creek (8-10%/yr), but this year, this area has been struggling more and the appreciation is not close to this figure since there is a surplus of homes on the market for this neighborhood. Additionally, how will the completion of I-540 to Knightdale impact the housing prices in that community? No one can say for certain, but eventually, it will help this area greatly.

3. Job Situation.

Your job situation can be a determining factor in your decision to purchase or not. If your company has been or rumored to have downsizing issues, then it may be better to ride it out before making a commitment to buy a home. Furthermore, is there a chance that you will have to relocate in the next year or two? If so, you may want to continue to rent instead of buy since it would be unlikely that you could recoup all of your investment in such a short time frame. Remember, we are not only talking about the price of the home, but also the closing cost on both the buying and selling of your home. To add an extra layer, selling your home may not always be a quick of a proposition that you would like it to be. Not only does choosing the right agent matter, but the overall market condition matters when you are selling a home.

3 Investment Only.

Many people consider the purchase of their private homes as an investment. This really is not a good way to think about it. Investments concentrate upon only the bottom line as far as increasing personal wealth. You invest in 401ks, stock market, and other such items for a pure profit motive. When it comes to your personal home, you are not making an investment decision, but rather a personal one. You are deciding if you could live in this home and raise a family in this neighborhood. You are deciding if the location is ideal for your commute to work and other activities that may interest you. You are deciding if the layout of the home would be conduce to your lifestyle and furniture. You are deciding if the schools are good enough to teach your children. The last thing you are deciding is the profitability of this purchase. It is always good to have a home that in the end appreciates and allows you to make money when you sell, but is this the most important thing? Most people would agree that a successful personal home purchase and subsequent sale would involve making enough on the sale to cover the sales price, closing cost and a small down payment on a new home.

Now, real estate can be a great investment if you approach it in this manner. There are many great homes, condos and townhouses that would make for a great investment in Raleigh, Cary or another community in the Triangle. For these purchases, one must have a different mindset than you would have for a personal residence. You must look at the viability of the home increasing in value of the term of ownership you plan to have. Flippers be aware that you must do your homework before making a purchase. To successfully flip a home in Raleigh, it must be a great neighborhood with a home that is under priced or undervalued due to the condition of the home. It would be difficult to make $100k on a flip in this market as the appreciation rate in this market has not been that dramatic. We have traditionally had a modest appreciation rate of 3-5% a year which is why our housing market is still competitive and has not priced many people out of the market.

4. Market Conditions.

I have left this topic for last because this is usually the least important item, but must be considered. I have met people who have purchased homes in areas that have seen dramatic increases in property values and the result was that they bought on the high end. The law of physic applies here in that "what goes up, must come down." This does not mean that the property values will return to 2001 price levels completely, but it will come down dramatically. The only winners in this situation are the ones who sold before the market began to descend. There again, who can predict to the day when a real estate market will begin to sour and the values of the homes will begin to decrease.

Traditionally, the Raleigh market has not been subjected to the national market trends since we are currently an untapped resource throughout the nation. We have been given some major press as being one of the best places to live, best sellers market, great business climate, low unemployment rates, etc. However, we have not been the market that has gone to the extremes of the market place. We have been very consistent with our growth, despite the number of people moving to the area. In part due to the untapped land that is yet to be developed in this market. The urban sprawl has begun in the Triangle, but has not gotten to the point that there is no land available to build new subdivisions. Many of these areas that have seen prices soar in the past few years have a shortage of land. If Raleigh and the Triangle reaches the projections of 2 million in population, then we may actually start to run out of land for development.

For more information about the buying process or if you have any questions about this article, please contact me and I will be happy to answer any questions you may have.