Housing prices in the Triangle rose to unprecedented levels during the height of the pandemic as families fled major cities, offices initiated teleworking, children began learning from home and homeowners wanted more space. The result was a 20% increase in the average price of a home in the Triangle and outrageous bidding wars for homes, including some properties buyers had never seen in person. At the other end of the spectrum, low-income families unable to pay their mortgages and rent were left with little recourse when the National Eviction Moratorium ended on Aug. 26.
The Well spoke with Roberto G. Quercia, the Trudier Harris Distinguished Professor in the city and regional planning department in the College of Arts & Sciences, about when the housing boom will end, if we should brace for another recession and what the end of the eviction moratorium means for North Carolina families.
Why is the housing market so competitive right now?
It goes back to the recession in 2008. Many people defaulted on their mortgages. The credit market froze, and construction on new homes and housing developments paused or even permanently stopped after the onset of the financial crisis. It took several years for companies and individuals to recover, so there was a period when few new homes were built while the demand continued to grow. This perfect storm is still contributing to the current shortage of affordable, single-family homes in the real estate market today.
Additionally, when the pandemic began, many construction crews halted work temporarily on homes. When safety measures were put into place, they faced new challenges: a labor shortage that has affected almost every industry, and supply chain delays of now highly prized building materials.
The final piece is low mortgage rates that allow families to spend more on homes than they would have 10 years ago, leading to inflated sale prices. In the last year in the Triangle, housing prices went up 20% on average.
When will the housing market return to pre-pandemic prices?
The market may return to longer listing times and bidding wars may slow, but it is unlikely that prices will drop back to where they were in 2019. We still have to make up for that shortage of newly built housing, which could take years. North Carolina, specifically the Triangle, is attracting more business from tech companies like Apple, Google and Amazon, and with those corporations we’re seeing an influx of people with high average salaries moving to the area.
Now, young families and people with lower incomes are trying to break into a housing market that is 20% more expensive and with a limited supply of houses for sale. I believe mortgage rates will rise next year, making it more difficult for lower-income families to make the jump from renting to buying even if the supply of housing increases.
On Aug. 26, the national moratorium on evictions ended. What does this mean for families who still haven’t recovered financially from the past 18 months?
There have been several federal relief programs passed during the pandemic to help families avoid eviction, but the distribution of funds have been slow.
The N.C. Housing Opportunities and Prevention of Eviction program, or HOPE, received $445 million for rental aid from the federal government since December of last year. As of Sept. 9, $374 million was distributed to tenants and landlords in North Carolina, leaving $71 million unspent so far. Three Triangle counties — Wake, Durham and Johnston — were allocated separate federal funding but still have large amounts left sitting on the table. As of Sept. 1, Wake County had only spent $4.3 million of the $63 million it was allocated last December, and Durham County had spent about $2.8 million of $26 million. Johnston County hadn’t spent any of its $13 million in federal rental assistance, since the program didn’t launch its online application portal until Sept. 7.
Meanwhile, an estimated 400,000 households in North Carolina have no confidence that they can pay the next month’s rent, according to a recent survey from the U.S. Census Bureau. Unfortunately, low-income households, many of which lived paycheck-to-paycheck before the pandemic, will be hit hardest. There are plenty of help wanted signs, but it will be difficult to secure housing in such a hot market even at $15 an hour.
How have landlords been affected by the housing crisis?
When tenants can’t afford their rent, property owners are still responsible for the mortgage, taxes, insurance, utilities, garbage removal, cleaning and repairs. In addition, there is some anecdotal evidence that tenants who are in quarantine or lockdown cause more wear and tear to the property because they now spend more time in their units, thus increasing repair expenses for the owners. These impacts can be more significant for those property owners who may only have a few tenants.
Should we expect to see another recession like in 2008?
No, at least not in the Triangle. When I look at the market fundamentals, I see a healthy, strong housing market with lots of demand and many people willing to pay to get into that market. There may be some price corrections in the next five years, but there won’t be a housing crash.