April 8, 2011—In our last installment, we talked about the Las Vegas market and likened it to investing in stock options – volatile and risky, but with incredible upside potential. Not for the faint of heart. Today we go to the other side of the spectrum. The Blue Chip market of Raleigh-Durham, North Carolina – stable, reliable, with very attractive fundamentals. First let’s look at the “what,” and then we’ll dig into the “why.”
Raleigh is located in northern-central North Carolina. Its housing market defies the real estate “meltdown” we all hear about on the evening news. The median price of a single family home was about $150,000 10 years ago, peaked at about $210,000 last year and has “crashed” back down to $200,000 at the time of this writing. The chart looks like a steady climb with no sign of the greatest economic crisis since the Great Depression:
Bear is mind that Raleigh did not see the 18% annual appreciation enjoyed by Las Vegas during the boom, but only saw a 33% rate of appreciation over the last 10 years. No roller coaster ride there. Just steady, reliable, dependable growth. If dull is the new sexy in real estate markets, Raleigh is as sexy as you can get.
Now that we know what happened, let’s consider why, and see if this is instructive as a way to choose a real estate market worthy of investing in. My next step is to research the migration patterns that impact Raleigh. Are people coming in or going out? Check out this chart that shows exactly that. http://www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.html?preload=37183
At a glance you can see that something is very attractive about this state and city. They are drawing population from every major city in the Northeast, as well as from virtually every major metro in the country. And then there’s the “half-backs.” The story goes that people who moved from the Northeast to Florida in decades past are so tired of all the New Yorkers crowding them out that they are coming half-way back to the Carolinas. Again, the chart proves it out. What’s the draw?
Raleigh ranked #7 in the 2010 Milken Institute Best-Performing Cities Index in creating and sustaining jobs (Durham is #15). The unemployment rate in Raleigh is 6.7% as of December 2010, down a point from a year earlier. How can that be? Three words – The Research Triangle. Anchored by North Carolina State University, Duke University and University of North Carolina at Chapel Hill, plus a blue chip list of corporations such as GlaxoSmithKline, Cisco, Verizon, Nortel, IBM and many more, Raleigh is gaining jobs and attracting population at a time when so many other markets are hurting.
You are beginning to see a clear picture of a market that works. Combine these tangible drivers of demand for real estate with the climate, scenic beauty and a hint of southern hospitality, and it becomes obvious what the draw is.
Finally, Raleigh is a place where investors can readily find investment properties that generate a positive cash flow. According to Trulia’s Rent vs. Buy analysis, it is less expensive to own than it is to rent in Raleigh. If you can buy a home cheaper than they can rent it, that difference is positive cash flow.
This process is how professional investors find markets with upside potential. You’ve heard the saying “all boats rise with the tide?” Raleigh is a rising tide. If you are looking for a place to put your money where you can feel confident that you will be able to cover your expenses and see steady and dependable appreciation, it looks like you’ve found one.
Greg Rand is the CEO of OwnAmerica, a company dedicated to teaching real estate professionals and consumers how to build wealth in American housing. OwnAmerica offers a web-based certification course for real estate agents who want to capture the residential investor market. Learn more about the course, “OwnAmerica Real Estate Investment Certification Program,” (OICP) for details.