Hot Housing: Investors and pinball players buy a record number of Triangle homes

RALEIGH – For home seekers, Raleigh’s housing shortage isn’t the only challenge, as real estate investors continue to buy up homes across the area to convert into rentals.

Investors bought more homes in the Raleigh area in the first quarter of 2022 than in any first quarter, according to an analysis of data provided to WRAL TechWire by national real estate brokerage firm Redfin.

The record starts in 2020 — and for the first quarter of 2022, investors bought 1,086 homes in Raleigh, a 16.6% increase from the first quarter of 2021.

Those homes sold accounted for 22.4% of the total home sales market, according to Redfin’s data, meaning more than 1 in 5 Raleigh properties sold in the first three months of the year were bought by investors.

In Durham, investors bought 20.4% of the homes sold in the area in the first quarter, up 18.6% from the number bought a year earlier.

However, there may be some signs that the real estate market is becoming less competitive.

Why? In May 2022, Triangle Multiple Listing Service (TMLS) data obtained from WRAL TechWire showed that the number of house listings decreased dramatically during the month.

And mortgage applications are declining, suggesting there may be less active homebuyers looking to compete in the housing market. Still, many homes receive multiple offers, but the median price of homes sold in Wake County in May 2022 remained flat, while in Durham County the median price decreased slightly in May 2022 compared to April 2022, according to TMLS reports.

Investors are still flipping triangle houses

Still, there is profit to be made in the Triangle’s real estate market, says ATTOM Data Solutions.

This is the segment of the market where an investor buys a property, makes improvements and repairs, and puts the home up for sale again.

This practice, known as flipping, increased in both Durham and Wake County in the first quarter of 2022 compared to the first quarter of 2021, ATTOM data showed.

In Durham County, flipping activity increased 118% year over year, with 252 objects flipped, and in Wake County, flipping activity increased 64% with 714 objects flipped in the first quarter.

In fact, the Durham-Chapel Hill metropolitan area had the highest flipping rate of any metro area in ATTOM’s study with populations under 1 million, at 15.3% of households. And in the Raleigh metro area, 76.5% of all homes bought with the intent to fix and flip the property were bought for cash, the data shows.

Triangle’s housing crisis deepens – vacancies fall and rents rise 20%

Even if gross profit goes down, gross ROI goes down

But the practice could become less profitable for real estate investors, the data shows.

“The good news for fix-and-flip investors is that demand from potential homebuyers remains strong, as reflected in this quarter’s report, which shows one in 10 homes sold in the first quarter was a flip,” Rick said Sharga, executive vice president of market intelligence for ATTOM. “The bad news is that rising mortgage rates are starting to slow home price increases and buyers have become more selective – and less willing to outbid other buyers for properties they are interested in. This has predictable implications for profit margins for investors.”

According to the data, the gross yield for the middle flipped property in Wake County was 13.1% for the quarter. But that is 5.8% less than in the previous year. In dollar terms, however, there wasn’t much of a difference as gross profit for the median flipped home was $46,000 in Q1 2022 and $46,250 in Q1 2021.

The same isn’t true for Durham County, where gross profits and gross ROI of the median flipped home decreased dramatically in Q1 2022 compared to Q1 2021.

In Q1 2021, median flipped home fins generated a gross return of $93,500 and a gross ROI of 26.7%. But in the first quarter of 2022, gross profit was $58,700 and gross ROI was 19.8%.

The rental crisis is getting worse

A new national report on the state of the country’s housing markets found that Raleigh is among a group of 20 US regions where rents have risen the most over the past year.

The State of the Nation’s Housing 2022 report found that rents in the United States rose at a record pace in early 2022, including a 12.4% year-over-year increase nationally in the single-family segment of the market.

And although rents rose by double digits in 116 of the 150 metropolitan areas tracked in the study, they rose 22 percent in Raleigh. That puts the capital in the top 20 in the county, according to the report and a related factsheet published by the authors, Harvard University’s Joint Center for Housing Studies.

Moreover, there are signs that even if the Triangle’s sell market cools, as mortgage rates rise — as they did again this week, just a bit after rising more than half a percentage point last week, according to the latest Data from Freddie Mac – The monthly rental price for available housing units in the triangle may also continue to increase.

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