Current Durham Market Statistics - October 2011
I'm sitting in my office now reviewing the latest market data from a variety of sources, including the raw local data my local MLS, Board of Realtors, Zillow, Trulia and others generate.
This is what I do regularly throughout each year, so that I can help my buyers and sellers get the information they need to make good, informed decisions.
Overall the market picture is mixed. While I’ve had an extremely good year, closing on average more than 3 transactions a month, I realize this is not at all indicative of the broader market. Studying all the data there are a few things that really stand out to me.
Low Housing Stock
First and most important is the overall drop in inventory on the market. While it varies from county to county and definitely by price range, overall the areas where I do the majority of my work — Durham, Chapel Hill, Carrboro, Hillsborough, and Pittsboro — saw an approximately 15% reduction in inventory as compared to 2010. Raleigh and Wake county saw similar drops. This is likely due to a combination of: (a) owners deciding now wasn't the time to go on the market and (b) many people choosing to rent their homes rather than sell. Again this is a macro view and the details can change significantly by price range and location. A drop in overall inventory is likely to keep prices stable.
Lower Prices On Average
The second thing that stands out for me from the data is that prices have come down this year again. There's some real variance depending on location and price, but overall it appears as if prices throughout the Research Triangle are down by roughly 2%, which lends some credence to my thoughts that less overall inventory stabilizes prices.
The flip side is that the total number of closed transactions and the averages sales price throughout the area are both down in the 8-10% range. These statistics clearly say to me that if (as I expect) we see overall inventory rise in 2012 prices are likely to drop another 2-3% by this time next year, all things being equal. In the past couple of years I've been consistent in predicting that our market is unlikely to change in any substantive manner until 2014. Nothing I'm seeing as I review the data we have so far this year gives me any reason to change my thoughts.
While you might think this would depress me, it really doesn't. I've been doing this a long time and this is hardly my first down market. I know the market will come back and I know Durham and Chapel Hill in particular will be back sooner than most areas. The combination of our great weather, educational facilities and opportunities, Research Triangle Park, our arts and food scenes, and overall reasonable real estate prices all combine to keep us among the “undervalued hot markets” in the country, so it's hard to complain or be negative.
So, Should I Rent Or Buy?
So what you should do in the coming year if you're either relocating or already living here? Do you rent or should you be looking at buying?
In general my advice to buyers is if you're not going to be here at least four years, then renting probably makes more sense. However, if you believe you’re going to be here at least four years then it really may make sense to buy rather than rent, particularly given the incredibly low-interest rates which, like house prices, can not and will not stay this low forever.
Everyone is different and I would encourage anyone who is seriously thinking of buying to sit down with someone like myself who can help you lay out the numbers and figure out what may work best for you.
Renting In Durham
First you need to consider rent. Let's say for a reasonable three bedroom home, it would cost you $1200 per month. So at the end of four years you'll have spent $57,600. That's it; the money is gone and basically you walk away.
Buying In Durham
In Durham you could expect to pay in the range of $150,000 for a comparable home. With 5% down you'd be financing $142,500. With an interest rate at 4.75% which is almost .75% above what rates are today and likely higher than they will be next year, the monthly mortgage payment would be $744. With property taxes and insurance added in you can figure $900 a month. At the end of four years you would owe the bank approximately $128,000 and would have spent a total of $43,200 in mortgage payments, taxes and insurance plus $7500 (5% down) plus another $5000+/- in closing costs for a total of $55,700 or roughly the same amount you'd spend in rent. I won't spend time discussing any of the benefits of owning you might enjoy, I'm going to focus here strictly on the finances.
The question then becomes what will the property be worth when you go to sell it in 4 years. If we assume the house actually loses 5% in value we'd be selling it for $142,500 and with a 5% commission taken out you'd be left with $135,375. You owe the bank $128,000 so you get back $7,000+/- from the $55,700 you put in, bringing your total investment down to $48,325 to buy versus $57,600 in rent.
If you assume the house actually drops in value 10% then the total to “own versus rent” after four years works out to $55,450 so it's a wash.
If the house is worth exactly what you paid for it four years later ($150,000), then buying would end up costing you $41,200 versus renting costing you $57,600.
I myself am expecting homes in this price range to actually increase in value over the next 4 years. If they were to increase by 5%, which is what I'm thinking is likely then the total amount spent buying would be $34,075 or almost half what it will cost you to rent.
Now this is just one example and depending on the price range you're looking at and the amount you're able to put down, the numbers may look different and I would encourage you to sit down with someone who can help you look at the specific numbers as they would apply to you.
In general it's my experience that if your plans are to remain in one area four or more years, then renting is likely to be a much more expensive option than buying. Of course your landlord undoubtedly greatly appreciates you helping him or her buy the property and will, I'm sure, tell you this regularly ;-)
Still on the fence about buying or renting? Get in touch with Larry and the team at My NC Homes. We can help you figure out the best course of action, as well as help you through the processes. Get in touch with us today to learn more.