Finding Prime Locations in North Carolina's Research Triangle for Home Purchase Using Zillow Insights
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Chapter 1: Current Market Dynamics
The U.S. real estate landscape is currently in a peculiar state. While housing prices are at or near record highs, the fixed-rate for 30-year mortgages is hovering just under 7%, specifically around 6.57% as of June 4. Following a brief decline in home values toward the end of 2022 across various states, a gradual rise in prices has been observed during the initial half of 2023, despite ongoing high inflation. Surprisingly, elevated mortgage rates have not deterred buyers; states like North Carolina, Pennsylvania, New York, and Ohio did not even see a minor dip in 2022.
Among the regions experiencing notable increases in home values, the Research Triangle in North Carolina stands out. Often referred to as the "next Silicon Valley," this area has seen a substantial influx of individuals and several prominent tech firms over the last decade.
Comprising cities such as Raleigh, Durham, Chapel Hill, Morrisville, and Cary, the Research Triangle is home to prestigious institutions like North Carolina State University (Raleigh), Duke University (Durham), and the University of Chapel Hill. The presence of these universities has attracted top talent from across the nation and beyond.
With major corporations setting up in the area, graduates from these elite universities often find career opportunities close to home, ensuring that some of the finest talents remain within the state.
For someone like me, who has been renting for eight years, the time seems ripe to consider homeownership. After relocating from Greensboro to Durham in early 2022, I have been closely tracking housing prices in the Research Triangle. To my astonishment, the prevailing economic challenges have not led to a decline in prices; rather, they continue to rise, albeit at a more modest pace compared to the previous few years.
As I recognize the area's promising future, I am leaning towards investing in real estate here. However, I plan to take a year to finalize my decision. Here are my reasons:
Accumulating a 20% Down Payment
Most of my savings are currently tied up in the stock market and my 401(k). I prefer to let those investments grow rather than dipping into them. A year should provide sufficient time to save for a 20% down payment before I actively search for a home.
Interest Rate Concerns
High interest rates remain a significant concern. The Federal Reserve is likely to maintain elevated rates as long as inflation persists. Once consumer spending decreases, we might see a drop in rates. Whether this will occur within a year is uncertain, but I’m willing to wait for clarity.
Housing Price Fluctuations
While not a pressing issue, a decrease in housing prices over the next year would be advantageous, allowing me to benefit from a dip. Historically, the U.S. housing market has tended to appreciate over the long term, so any investment I make is likely to yield positive returns over time.
A key consideration for me is the specific area or ZIP Code in which to buy, as certain locations tend to appreciate more rapidly than others. This article aims to delve deeper into this topic.
Here are my criteria for selecting a property:
- Type: Condo or Townhouse
- Bedrooms: 2+
- Bathrooms: 2+
- Price: Under $500,000
- Location: Durham, Chapel Hill, Morrisville, Cary, Raleigh
While many factors play a role in the home-buying process, these are the primary considerations I am focusing on during this initial stage.
Location: The Most Crucial Factor in Home Buying
When it comes to purchasing property, the ZIP Code is paramount. The average price appreciation within a specific area impacts all homes located there. This underscores the common advice of buying the least expensive home in an upscale neighborhood—not that this is my strategy, but it highlights the significance of location.
What constitutes a desirable location? Several factors can influence property values, such as the influx of businesses and residents, new developments, improved infrastructure (like roads and parks), and the availability of amenities including restaurants, shops, and educational institutions.
As previously mentioned, the combination of top schools, tech enterprises, and ongoing property development is drawing people from across the country to this region. With living costs soaring in major cities like San Francisco, Los Angeles, and New York, many are opting to relocate to the Triangle area.
This surge in population has spurred demand for further development in entertainment, recreation, and convenience. Major tech firms like Google, Apple, and Microsoft are making significant investments in the area’s infrastructure, creating sophisticated campuses akin to those found in established tech hubs such as Silicon Valley and Austin.
In essence, increased development attracts more residents, which in turn drives up demand for housing and property prices. I anticipate that property values in this region will continue to rise for decades, especially considering that the Research Triangle is still in the early stages of its development.
Chapter 2: Data Analysis from Zillow
The dataset utilized for this analysis was sourced from Zillow's extensive property database. It allows users to filter data by various geographical areas and other criteria. The dataset includes forecasts, rental prices, sales prices, sales counts, and inventory data for further analysis.
For my research, I focused on the Zillow Home Value Index (ZHVI), which provides time series data averaged across specific geographical locations. The data I examined was categorized by ZIP Codes and specifically pertained to 2-bedroom homes, as that aligns with my preferences.
This dataset consists of 16,551 rows and 290 columns, with the initial columns serving as metadata, such as RegionName (ZIP Code), State, City, and CountyName. The remaining columns detail average monthly housing prices for each ZIP Code from January 2000 to December 2022.
A link to the specific CSV dataset is available on my GitHub, which also includes the code for the analysis.
Examining Historical Housing Price Trends Across Cities
An analysis of historical mean and median housing prices in North Carolina reveals that the market reached its lowest point at the end of 2012, after which a consistent upward trend has emerged. To estimate average yearly home price appreciation, I focused on the decade from December 2012 to December 2022, excluding the 2008 housing market crash.
Data indicates that Durham has seen the highest appreciation in property values over the last decade, with a remarkable increase of approximately 175%. This puts Durham ahead of Cary, which experienced about a 132% increase—closer to the state average along with Morrisville and Raleigh. Conversely, Chapel Hill, despite having the highest average home prices both now and a decade ago, recorded a significantly lower appreciation rate of around 85%.
Interestingly, while Chapel Hill commands higher prices, its slower appreciation rate suggests more cautious investment potential compared to Durham, which, despite starting from a lower average price, has shown tremendous growth.
The percentage increase in housing prices is a crucial metric for estimating future returns, representing a buyer's potential rate of return (ROR). Return on investment (ROI) reflects the absolute financial gain over a specified period and heavily relies on the initial purchase price.
This explains why Cary is projected to yield the highest ROI over the next decade due to its combination of high initial prices and strong yearly appreciation. In contrast, Chapel Hill ranks lower for this metric while Morrisville, Raleigh, and Durham remain competitive.
Forecasting Future Returns Across ZIP Codes
Next, I examined the same metrics at the ZIP Code level, which offers deeper insight into housing price distributions across North Carolina. This approach makes it easier to pinpoint geographical areas for property investment.
As of December 2022, the average housing prices indicate that three out of the top four ZIP Codes are in Raleigh, with the remaining one in Cary. However, Chapel Hill, despite its overall higher prices, warrants caution regarding specific ZIP Codes like 27608, 27607, and 27601, all in Raleigh.
Raleigh's lower average price compared to Chapel Hill can be attributed to several more affordable codes, including 27610, 27616, 27604, 27606, 27615, and 27609, which dominate the lower end of the price spectrum. The table below details the ten cheapest ZIP Codes in selected cities.
Analyzing the average price appreciation rate from 2012 to 2022, it becomes evident that the ten highest appreciation rates are primarily found in Durham and Raleigh, with Durham housing five of these areas.
ZIP Codes 27701, 27704, and 27703 in Durham saw appreciation rates of 236.37%, 196.89%, and 193.31%, respectively. Raleigh's 27610 follows at 176.70%, reflecting a substantial drop from Durham's figures. Durham’s additional codes, 27707 and 27712, also feature prominently with rates of 159.30% and 157.66%.
This data underscores Durham's potential as one of the most promising areas in the Research Triangle for housing price growth. As previously mentioned, Durham boasts the highest average appreciation rate among all cities, evident in the preceding chart.
Chapel Hill's three ZIP Codes rank as the areas with the lowest appreciation rates, each recording under 100% growth over the past decade.
The analysis of mean ROI across ZIP Codes correlates closely with initial purchase prices, showcasing Raleigh with the three top codes (27608, 27601, and 27607) for expected ROI, followed by Cary's 27519. All three Raleigh areas are projected to appreciate by $280,000 to $300,000 over the next decade.
Notably, 27701 from Durham ranks fifth with an expected appreciation of approximately $243,525. The subsequent code, 27703, also from Durham, exhibits a much lower expected appreciation of around $209,562, marking a 14% decline.
A key distinction in this analysis compared to the initial purchase price chart is that Chapel Hill's lowest ROI is attributed to its generally slower appreciation rates, leading to diminished investment potential.
Examining the average return over the next decade, Durham's ZIP Codes 27701, 27704, and 27703 showcase the highest RORs at 70.27%, 66.32%, and 65.91%, respectively.
Interestingly, Raleigh's 27610 holds the fourth highest ROR but exhibits one of the lowest dollar appreciation figures at approximately $165,522. This suggests that although purchasing in 27610 may yield lower absolute returns, it offers an affordable entry point with the potential for rapid value growth.
Conclusion: Evaluating Investment Opportunities
Based on my analysis, Raleigh and Durham emerge as the most promising cities for property investment. Morrisville and Cary present solid options, while Chapel Hill appears less attractive. This conclusion is drawn from both city-level and ZIP Code-level data evaluations.
For those with adequate resources, investing in Raleigh's ZIP Codes such as 27601, 27607, or 27608 is likely to yield the highest absolute returns. Cary's 27519 also stands out, with expected average appreciation of around $277,075 over the next decade, translating to over a 55% return.
For those seeking good value without venturing into the ~$500,000 price range, Durham's codes 27701, 27703, and 27704 offer high projected appreciation rates, with initial prices below $350,000, and 27704 even dipping below $300,000.
Alternatively, for those looking to maximize their budget, 27610 in Raleigh, with an initial average purchase price around $259,197 and a high predicted appreciation rate, could be an excellent opportunity for future growth.
Personally, I am inclined towards the 27701 area in Durham due to several factors:
- Projected high housing price appreciation rate over the next decade
- Proximity to my workplace
- Current residence in Durham (27701)
- Ongoing development in retail, dining, and entertainment, further fostering growth
- Abundant outdoor recreational options, such as lakes and parks
- The vibrant atmosphere and diverse community fostered by Duke University
It is important to note that while data plays a crucial role, personal factors also contribute significantly to the decision-making process in home buying.
Utilizing the Housing Market Analysis Application
The housing market analysis application was developed using Python and is deployed via Streamlit. You can access it [here](#).
Below are usage instructions for analyzing housing data across the U.S. These instructions are also available at the top of the application’s interface.
Simply follow the guidelines to generate similar analyses to those presented in this article. Users can input data for any state or city and choose their desired time frame for historical data. This same historical data serves as a basis for projecting future ROI and ROR based on user-selected periods.
Additional metrics can be selected, including mean or median analysis and options for city or county-level data. For the analysis conducted in this article, I opted for 'mean' and 'city' metrics.
Accessing the Code for the Application
The application’s code and dataset are available in my [GitHub repository](#). Another way to access the app is by clicking the "Open in Streamlit" button in the repository's readme section.
A follow-up article will delve into the technical aspects of the application’s code.
Final Thoughts
In closing, I want to emphasize that this analysis is just one component to consider when evaluating real estate options. The decision to purchase a home is deeply personal, encompassing numerous factors beyond identifying lucrative areas.
Considerations include home-specific attributes such as amenities, layout, materials, plumbing, air conditioning, and structural integrity. Additionally, proximity to essential services like schools, gyms, grocery stores, and transportation is vital.
Financial aspects, including mortgage interest rates, property taxes, insurance, HOA fees, and closing costs, are also crucial but were not covered in this discussion.
Lastly, there are intangible factors to contemplate. How does the property resonate with you? What is your instinct telling you about the purchase? Are you ready to commit a significant amount of money that could be invested elsewhere?
Thus, it’s essential to take the necessary time to evaluate all factors involved in the home-buying process.
Thank you for reading! Stay tuned for a follow-up article detailing the technical aspects of the code behind the app. Cheers!