A quick Google search of the term “housing bubble” leads to millions of results. It’s obvious that people in the U.S. are concerned that a bubble is brewing in 2022. After all, the housing market crash of 2008 is still on many minds, and it feels eerily similar to what is happening across the United States today. But to fully understand the difference, it helps to look at the nuances of a housing bubble and the landscape of the Triangle market both today and into the future.
Defining a housing bubble
A housing bubble is created when real estate unexpectedly grows in demand and causes a spike in home pricing. And while that sounds familiar to the market in Raleigh-Durham, the biggest issue with a housing bubble is when speculators or investors sit on a property to make money on home improvements. If the bubble bursts, homes end up being overpriced and sitting on the market, not selling.
In 2008, several other factors contributed to the housing bubble and subsequent crash. Low-interest rates and an expansion of mortgages to high-risk buyers created a demand for housing across the country. Known today as subprime mortgages, these risky loans often became unaffordable for their owners. Many owners try to sell to get out of their mortgages. Eventually, so many homes were on the market that foreclosures and repossessions increased drastically until the market began to tank. The Great Recession was caused by the global strain of the real estate market, and it took years for the U.S. to rebound.
What’s happening in the Triangle
Paul Kane, executive vice president and CEO of the Home Builders Association of Raleigh-Wake County, is adamant that the Triangle is not returning to 2008. “This is not a bubble,” he said. “People are buying houses sight unseen because they just need a house. That is a sign of a market where people desperately need homes.”
The data backs up Kane’s statement. Despite historically low population growth across the U.S., the 2020 U.S. census showed the Triangle had grown significantly. “We’re growing by 63 people a day,” he said. “That’s a quarter of a million people in 10 years. I think it’s starting to become more common knowledge that we are in the middle of a historic housing shortage. We have to do something about it now.”
Kane pointed to the industry that is coming to the region. With companies like Apple, Google, and Fujifilm establishing tech hubs in the Triangle, their employees are flocking to the area.
“Industry is coming here, and their people need a place to live,” he said. “People are moving from New York, California, and the Triangle seems pretty affordable compared to those places. They don’t blink an eye at paying the prices.”
This industry will be a large part of the growth across the Raleigh-Durham area. Kane pointed to a need to catch up from labor and supply shortages caused by the Great Recession. “We just need a lot more homes. We need to remove barriers to getting homes built. If there were a glut of homes, they would not be priced this way. It’s Economics 101, supply and demand.”
The future of the Triangle
The Triangle won’t be at risk of a real estate bubble any time soon. The high-tech jobs that are coming to the area will bring higher salaries and improved infrastructure with them. For example, the North Carolina Department of Commerce estimates Apple’s jobs will make a massive impact on the state. The company will bring average salaries of $187,001 and an additional $550 million in payroll dollars per year. Apple will also generate more than $1.5 billion for the state.
Apple has also promised millions of dollars to support schools and community initiatives throughout Raleigh-Durham. They will also provide $110 million for infrastructure and better public schools to counties throughout North Carolina. Meanwhile, Google says part of the company’s plan to invest billions of dollars into economic recovery. And Fujifilm promises their facility will create a hub for enhancing infrastructure and talent within the Triangle.
With jobs comes a need for housing options at every level. And as more people flock to the area, the Triangle will only continue to grow. In other words, it’s okay to stop worrying about the housing bubble and move in confidence that homeowners have a great investment for the future.
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