Broken Rules of Supply and Demand in the Raleigh-Durham Housing Market

December 4, 2023

Expert insights on the puzzling Raleigh-Durham housing market. Low inventory yet slowing sales have broken the rules of supply and demand.

The Raleigh-Durham housing market has been experiencing a unique phenomenon that challenges the fundamental principles of supply and demand. Despite low inventory levels, which typically drive up prices and spur sales, the market has witnessed a slowdown in sales. This puzzling situation has left many wondering about the underlying factors contributing to this anomaly and how it compares to the rest of North Carolina and the US housing market.

In January 2022, the Raleigh-Durham area had only 1,585 houses on the market, a staggering 46% decrease from the previous year. This scarcity has resulted in a market with only about one month's worth of available houses, far from the six months' supply that characterizes a balanced market. The limited inventory has driven prices to unprecedented levels, with the median home price in Raleigh-Durham surpassing $400,000, exceeding the affordability range of most buyers.

The Scarcity of Houses for Sale

The severe shortage of houses available for sale in the Raleigh-Durham area is a primary contributor to the market's unusual behavior. With only a fraction of the typical inventory available, the market has become highly competitive for buyers, leading to bidding wars and rapid price appreciation.

This scarcity has a profound impact on the market's supply and demand dynamics. While demand remains strong due to the area's steady population growth and abundant job opportunities, the limited supply has created an imbalance that deviates from the norm. This situation is more pronounced in the Raleigh-Durham area compared to other parts of North Carolina and the US, where inventory levels are not as critically low.

The Impact of High Prices on Buyers

The rising home prices in the Raleigh-Durham area have significantly affected affordability for buyers. As prices continue to appreciate, many potential buyers find themselves priced out of the market, unable to afford the homes they desire.

To make matters more challenging, the increase in mortgage interest rates in 2022 has made monthly payments substantially more expensive. This combination of high prices and increased borrowing costs has put homeownership out of reach for many buyers, contributing to the slowdown in sales despite the low inventory.

Compared to other parts of North Carolina and the US, the Raleigh-Durham area has experienced a more rapid price appreciation, exacerbating the affordability issue for local buyers.

Is a Housing Bubble Imminent?

The remarkable 20% increase in home values in the Raleigh-Durham area last year alone has raised concerns among some experts about the possibility of a housing bubble. They argue that such rapid price appreciation is unsustainable in the long run and may lead to a market correction.

However, the Raleigh-Durham area has historically been more resilient to housing market fluctuations compared to other parts of the country. The region's strong economic fundamentals, including steady population growth and a thriving job market, have maintained a consistent demand for housing, reducing the likelihood of a sudden price crash.

While the market may experience a slowdown or stabilization in price growth, a severe housing bubble burst, as seen in other parts of the US during the Great Recession, is less likely in the Raleigh-Durham area.

Factors Contributing to the Broken Rules

Several key factors have played a role in disrupting the traditional supply and demand dynamics in the Raleigh-Durham housing market. By examining these elements and comparing them to the rest of North Carolina and the US housing market, we can gain a better understanding of the current situation and its implications for buyers, sellers, and investors.

The Challenges of Building New Houses

Despite the high demand for housing in the Raleigh-Durham area, builders face significant challenges in constructing new homes to meet this demand. One of the primary obstacles is the rising cost of building materials and labor, which has led to higher prices for new homes.

These increased costs have forced builders to list new homes at premium prices, further contributing to the overall affordability issue in the market. Additionally, there are limitations on the speed at which new neighborhoods can be developed, such as zoning regulations and infrastructure requirements.

While the Raleigh-Durham area has managed to grow responsibly and avoid an oversupply of housing, this measured approach to development has contributed to the persistent housing shortage. Compared to other parts of North Carolina and the US, the Raleigh-Durham area faces unique challenges in balancing the need for new housing with sustainable growth practices.

The Rise in Home Building

Despite the challenges faced by builders, the Raleigh-Durham area has seen a significant increase in home building activity compared to other parts of North Carolina and the US. This rise in construction has been driven by the strong demand for housing in the region, fueled by its growing population and robust job market.

However, the influx of new housing developments has not been sufficient to keep pace with the demand, leading to a persistent imbalance in the market's supply and demand dynamics. While new construction has helped to alleviate some of the inventory shortages, it has not been enough to bring the market back into equilibrium.

Compared to the rest of North Carolina and the US, the Raleigh-Durham area has experienced a more pronounced rise in home building activity, reflecting the region's unique growth patterns and housing needs.

Economic Factors and Affordability

Economic factors, such as interest rates and financing options, play a crucial role in shaping the housing market. In recent years, historically low interest rates have made borrowing more affordable, encouraging more buyers to enter the market.

However, the Raleigh-Durham area has seen a significant increase in home prices, outpacing income growth and eroding affordability for many buyers. This trend is more pronounced in the Raleigh-Durham area compared to other parts of North Carolina and the US, where home prices have not risen as rapidly.

As interest rates begin to rise, the combination of high prices and increased borrowing costs may further strain affordability, potentially leading to a slowdown in sales and a more challenging market for buyers.

Navigating the Raleigh-Durham Housing Market

Given the unique circumstances of the Raleigh-Durham housing market, it is essential for buyers, sellers, and investors to adapt their strategies to navigate this challenging landscape successfully.

Advice for Buyers and Sellers

For buyers in the Raleigh-Durham area, it is crucial to approach the market with caution and patience. Buyers should carefully assess their budget and work closely with an experienced real estate agent who can help them navigate the competitive market conditions.

While the low inventory and high prices may make the home search process more challenging, buyers who remain persistent and flexible in their criteria may still find opportunities to purchase a home that meets their needs.

Sellers, on the other hand, must focus on accurate pricing and effective marketing to attract buyers in this unique market. By working with a knowledgeable real estate agent who can provide data-driven insights and strategic guidance, sellers can position their homes competitively and maximize their chances of a successful sale.

Expert Insights from a Local Real Estate Agent

As a seasoned real estate agent with extensive experience in the Raleigh-Durham area, I have helped countless buyers and sellers navigate the complexities of this market. One of the most important pieces of advice I offer to buyers is to partner with a trusted agent who can guide them through the process and help them make informed decisions.

In a competitive market like Raleigh-Durham, having a knowledgeable advocate by your side can make all the difference in finding the right home and negotiating a successful purchase. Buyers should be prepared for potential bidding wars and remain patient, knowing that the right opportunity will eventually present itself.

For sellers, I emphasize the importance of data-driven pricing and targeted marketing strategies. By leveraging advanced market analysis tools and a deep understanding of local trends, my team and I help sellers determine the optimal listing price for their homes, ensuring they remain competitive while maximizing their return on investment.

Additionally, we employ cutting-edge marketing techniques to showcase our clients' properties to the right audience, generating excitement and attracting qualified buyers. Even in a challenging market, a well-prepared and strategically marketed home can stand out and achieve a successful sale.

The Importance of Communication and Transparency

Throughout the buying or selling process, communication and transparency are essential. As a real estate professional, my goal is to educate and empower my clients, providing them with the information and guidance they need to make confident decisions.

I believe in maintaining open lines of communication, keeping my clients informed at every step of the way. Whether it's providing regular market updates, explaining complex contract terms, or addressing concerns and questions, I prioritize clear and honest communication.

In a market as dynamic and unpredictable as Raleigh-Durham, having a trusted advisor who values transparency and keeps you informed can make the experience much more manageable and less stressful.

Adapting to the New Normal

The Raleigh-Durham housing market's unique situation, characterized by low inventory and slowing sales, has challenged the traditional rules of supply and demand. By understanding the factors contributing to this phenomenon, such as increased home building, shifting buyer preferences, and economic factors, buyers, sellers, and investors can adapt their strategies to navigate this market successfully.

Compared to the rest of North Carolina and the US housing market, the Raleigh-Durham area presents a distinct set of challenges and opportunities. While the market may be more competitive and complex than others, it also offers the potential for long-term growth and stability, thanks to its strong economic fundamentals and quality of life.

By staying informed, working with experienced professionals, and maintaining a long-term perspective, individuals can make informed decisions and maximize their chances of success in this dynamic market. Whether you're a buyer searching for your dream home, a seller looking to maximize your return, or an investor seeking new opportunities, the Raleigh-Durham area remains an attractive and rewarding market for those who approach it with the right mindset and strategy.

Tim Clarke's Perspective

As a seasoned real estate agent with 17 years of experience and the founder of the Tim M. Clarke Team, I have witnessed the Raleigh-Durham housing market's evolution firsthand. While the current situation may seem challenging, it is essential to approach it with a strategic mindset and a deep understanding of the local market dynamics.

For buyers, I recommend focusing on identifying properties that align with your long-term goals and working closely with a knowledgeable agent who can help you navigate the market's complexities. Sellers, on the other hand, should prioritize competitive pricing and enhancing their property's appeal to attract serious buyers in a market with increased competition from new housing developments.

Investors should take a long-term view, evaluating the market's potential for growth and considering diversifying their portfolios to include both new construction and existing properties. For commercial investors, I advise paying close attention to retail opportunities near new home developments, as these areas often experience increased demand for goods and services as the population grows. Additionally, industrial opportunities near developing highways can be attractive, as they provide easy access to transportation routes and can benefit from the region's expanding infrastructure.

When considering multifamily investments, it's crucial to analyze the demographics of the area, such as population growth, age distribution, and income levels. A growing population, particularly in the younger age brackets, can strengthen multifamily cap rates, as these individuals are more likely to rent than purchase homes.

By staying informed, adaptable, and working with trusted professionals, you can maximize your chances of a pleasant and successful experience in the Raleigh-Durham housing market, even as it navigates these unique supply and demand challenges. Whether you're a residential or commercial investor, the key is to remain vigilant, stay informed about market trends, and be prepared to seize opportunities as they arise.


What's causing the low inventory in the market?

A few factors: existing homeowners not listing due to limited options, rising building costs limiting new construction, and high demand from steady population growth.

How long will prices keep rising in Raleigh/Durham?

Hard to say for sure, but price growth may moderate with higher interest rates reducing buyer budgets. Still, strong local economy supports continued gains.

Are there any affordable areas left in the region?

Yes, but they are limited. Look to outer suburbs like Rolesville, Wake Forest, and parts of Durham for lower prices.

Should I wait to buy until inventory improves?

Not necessarily - more buyers may return when rates drop, spurring competition again. If your budget allows, buying now can make sense.

How can buyers compete in a bidding war?

Make a strong preapproval offer with favorable terms like flexible move-in dates. Write a personal letter to the seller. Act quickly.

What's the best pricing strategy for selling my home?

Price slightly below market value to generate interest, then leverage multiple offers to start a bidding war and maximize sale price.

How long does the average home stay on the market?

In 2022, average days on market was just 10. Well-priced homes in good condition sell incredibly fast.

Should I sell now or wait for higher prices?

No way to time the market perfectly. If you need to sell soon, today's prices are still historically high.

Will a recession crash the housing market here?

The Triangle market is more insulated given tech and education sector strength. A downturn may slow price growth but not necessarily trigger drops.

What sets the Tim M. Clarke team apart?

Deep knowledge of local markets, data-driven pricing, and five-star marketing to maximize sales. Focus on client education and transparent guidance.

Tim M. Clarke

About the author

17 years as a Realtor in the Research Triangle, Tim seeks to transform the Raleigh-Durham real estate scene through a progressive, people-centered approach prioritizing trust & transparency.

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