North Carolina Real Estate Market Trends & Analysis


Historically low mortgage rates, increases in wages and more available inventory have helped counteract rising home prices across the country, and the North Carolina real estate market is no exception.  Thanks, in part, to major cities like Charlotte and Raleigh, real estate in North Carolina has seen its average prices rise at a faster rate than the majority of the country.  However, price increases are expected to temper in the wake of COVID-19. That, combined with a resilient economy and improving affordability, should stimulate an already active housing market.  Buyers, sellers, and investors should all find themselves with a growing number of opportunities for the foreseeable future.

The Top North Carolina Real Estate Markets


While the best real estate market in North Carolina is up for debate, here’s a list of the cities investors may want to pay special considerations to:

North Carolina Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Attorneys, Lenders
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Non-Judicial
Process Period: 2 - 4 months
Notice of Sale: Sheriff
Redemption Period: 10 Days

Taxes

Income Tax: 5.75%
Corporate Tax: 6.90%
Sales Tax: 4.75%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 0.78%
Property Taxes by County: http://www.tax-rates.org/north_carolina/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,602.00
Transfer Fee: 0.2% & 0.4% (local option to increase)
Origination Fee: $1,887.00

Overview

  • Median Home Value: $208,001

  • 1-Year Appreciation Rate: +5.2%

  • Median Home Value (1-Year Forecast): -1.3%

  • Median Rent Price: $1,395

  • Price-To-Rent Ratio: 12.20

  • Average Days On Market (Zillow): 78

  • Unemployment Rate: 8.5% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 10,488,084 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $52,413 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 14.27%

  • Foreclosure Rate: 1 in every 11,868 (0.8%)

Median Home Prices In North Carolina

Not unlike everywhere else, North Carolina was hit hardest by the last recession around the first quarter of 2012; it was then that the state’s median home price dropped as low as $147,000. That said, the first few months of 2012 simultaneously marked the depths of the Great Recession and the beginning of one of the strongest recoveries the housing sector has ever experienced. Home prices began appreciating across the country, and the North Carolina real estate market was certainly no exception to the rule.

Thanks to widespread optimism, a strengthening economy, and—for better or for worse—a distinct lack of inventory, home prices in North Carolina have enjoyed nearly a decade’s worth of historical growth. Since the first quarter of 2012, the median home value in North Carolina has appreciated by nearly 40.0%. Today, the median home value in North Carolina is $208,001.

Dating back to the turn of the century, however, no other cities have appreciated more in North Carolina than the following (according to NeighborhoodScout):

  • Zirconia

  • North Topsail Beach

  • Topsail Beach

  • Mill Spring

  • Eure

  • Surf City

  • Asheville

  • Wrightsville Beach

  • Hot Springs



To put things into perspective, the median home value in the United States appreciated 53.2% over the same period (February 2012 to August 2020). Today, the median home value in the United States is a very healthy $248,857.

The difference in values is not an indictment on the North Carolina real estate market. If for nothing else, real estate in North Carolina has made up ground in recent history. Thanks—largely—to lower prices, the North Carolina real estate industry has been granted more room for growth, which bodes very well for local investors. In the last year (alone), real estate in North Carolina appreciated at a faster rate than the country as a whole—5.2% and 4.1%, respectively.

It is worth noting, however, that as North Carolina makes up ground, it too is expected to see its own appreciation rates temper. The presence of the Coronavirus (alone) has already seen local prices drop.  That, in addition to fewer houses being listed, will drop prices for now, but they are fully expected to rise by the year's end, if not the first part of 2021.

Median Rent Prices In North Carolina


Not surprisingly, rental rates are strongly influenced by local home values. The amount a tenant can expect to spend (or a landlord can expect to charge) is largely dependent on the median home value of their respective area. Consequently, increases in home values will typically lead to subsequent increases to their rental rate counterparts. Not to be excluded, depreciation also tends to reduce the amount people spend on rent.

While the increase in North Carolina rental rates isn’t as pronounced as home prices in the last eight years, it has done its best to keep pace. That said, while the median home price increased, rental rates jumped as much as 30.1%. As a result, the median rent in North Carolina is now $1,395; that comes out to about $16,740 a year, or 31.94% of the state’s median household income.

For a better perspective on how the North Carolina rental market stacks up, the median rental price in the United States is $1,650. In the last eight years, the median rent in the United States has increased by 26.0%.

While still cheaper than the national average, the North Carolina real estate market has seen rents increase at a faster rate than the rest of the country over the last eight years. As a result, the state’s price-to-rent ratio has increased slightly, but not at the cost of making renting the more affordable option. In fact, with a price-to-rent ratio of 12.20, it is usually more affordable to buy a house than to rent one in the North Carolina housing market.

North Carolina Foreclosure Trends & Statistics


While home prices in North Carolina haven’t caught up to the national market, real estate investors are nonetheless starting to grow accustomed to historically high prices. Even though the median home value in North Carolina is well below the national average, profit margins are growing slimmer with each consecutive month of appreciation. It is worth noting, however, that the same price increases that have eaten into potential profit margins have also led to more foreclosures. For all intents and purposes, North Carolina has a relatively low foreclosure rate.

Around this time last year, the North Carolina real estate market had one of the highest foreclosure rates in the country. Today, one in every 11,868 homes has been dubbed distressed; that means 0.8% of the state’s housing inventory is either at risk of defaulting, bank-owned, or being auctioned off. The foreclosure rate of the United States, on the other hand, is somewhere in the neighborhood of 0.6%.

In the last year, North Carolina’s foreclosure rate has decreased a lot. As recently as July, “the number of properties that received a foreclosure filing in NC was 10% lower than the previous month and 82% lower than the same time last year,” according to RealtyTrac. Foreclosures across the whole country, however, are down 83.0% year-over-year.

Here’s a list of the counties with the highest distributions of foreclosures in North Carolina:

  • Jones: (1 in every 2,474)

  • Onslow: (1 in every 3,227)

  • Edgecombe: (1 in every 4,148)

  • Camden: (1 in every 4,197)

  • Forsyth: (1 in every 4,374)



Tax Lien Investing



  • Tax Lien or Deed: Tax Deed State (Auctions called: Property Tax Foreclosure Sales)

  • Redemption Period: 10 day upset period after sale. Anyone can bid 5% of $750.00 more and with this trigger a re-sale

Real Estate Investing In North Carolina


Investors in North Carolina have found themselves the beneficiaries of several positive indicators. Not unlike the majority of the United States, North Carolina real estate investors have been able to use local metics to their advantage. Real estate investors and homeowners across the country, in fact, have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.”

The report acknowledges that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in approximately 13 years. Investors across the country have seen profits grow, and there’s no reason investors in North Carolina can’t expect the same for the time being.

With home values higher than they have ever been in a good majority of markets, the North Carolina real estate investing community is still granted access to relatively affordable inventory. Despite higher prices in North Carolina, however, the local distressed property market appears ready and willing to supply investors with affordable deals.

Currently, auctions represent the most abundant source of distressed properties in North Carolina. Making up 47.8% of the state’s distressed inventory, auction homes appear to be the most accessible foreclosures on the market. Therefore, the North Carolina real estate investing community should pay special considerations to auctions being held in their area.

To be clear, the presence of foreclosures is a good sign for investors. The North Carolina real estate market is firing on all cylinders at the moment. Nearly every exit strategy is in play, but there’s one that makes more sense than others: adding to a rental property portfolio. While it’s entirely possible to make profits rehabbing and wholesaling, the higher acquisition costs associated with 2020 have made attractive profit margins harder to come by. Instead, investors should look into building a rental property portfolio. Years of cash flow can very easily offset today’s higher purchase prices.

North Carolina Housing Market Predictions


  • Winston-Salem should see an influx of buyers: With a median home value of $152,337, the Winston-Salem real estate market is well below the state average. As a result, there’s a good chance more people will look to Winston-Salem as a means of escaping today’s relatively high prices everywhere else. The added attention should turn into more buyers, and create more activity, which will bode well for local investors. The unique affordability, combined with appreciation potential, may be able to create the perfect investor environment.

  • Foreclosures should continue to rise: With one of the highest foreclosure rates in the country already, it is fair to assume the trend will continue before it gets better. Expect foreclosure filings to rise for now, but the market should return to a more normal rate as things begin to temper.

  • Home values will rise sooner rather than later: The Coronavirus has suppressed price growth since it took hold in March. However, confidence in the market is growing, and the lack of available housing should increase prices sooner rather than later. The lack of listings will increase competition and allow owners to raise prices later in the year, and perhaps even into 2021.

North Carolina Real Estate Market Summary


Despite trailing behind national real estate trends, the North Carolina real estate market has made up a lot of ground since the last recession. Nearly every indicator is better off today than even just a few short years ago. However, there’s one that still needs to get under control before the state can realize its true potential: foreclosure filings. There are simply too many foreclosures. Nonetheless, distressed inventory has helped local investors seek out attractive profit margins. As a result, North Carolina may have more opportunities for investing than most other states.

Sources:



https://www.zillow.com/nc/home-values/
https://www.zillow.com/home-values/
https://www.zillow.com/winston-salem-nc/home-values/
https://www.bls.gov/eag/eag.nc.htm
https://www.census.gov/quickfacts/NC
https://www.realtytrac.com/statsandtrends/foreclosuretrends/nc/
https://www.realtytrac.com/statsandtrends/nc/
https://www.realtytrac.com/statsandtrends/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
https://www.neighborhoodscout.com/nc/real-estate

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