Every four years is a special year. We have elections and Olympics.
The Olympics are far more fun to watch. The only fly in the ointment
this year is actually a mosquito invading Rio with the Zika virus. I think I
will watch the Olympics on TV. The elections will be far more important
and will perhaps, more than ever, determine the direction this country
takes going forward. I am at least smart enough not to offer any direct
political opinions in this newsletter, but we will explore some of the issues
that effect your desire to own real estate.
I am going to discuss what is going on with the economy by dividing
the discussion into national issues and local issues. Nationally our biggest
economic problem is the looming national debt. 8 years ago our
debt was 40 % of GDP (total goods and services we produce). Today the
debt is 75% of GDP. There have always been economists who have
equated equal GDP and debt as the mystical economic cliff, but they
really never thought we would get there. In the last quarter of 2015 our
GDP grew at a pathetic 0.7% when 3% is our goal. The US has the only
economy on the planet on the plus side, however, even if barely.
Did you know that only 37% of adults have enough savings to pay a
$500 car repair bill? Nationally we need millennials to get involved with
the economy and the housing market, but they are struggling. Rents
across the nation are averaging $1,180 a month, an all time record. Purchasing
a house is even tougher for these newcomers to the workplace.
In two of the best markets for millennials, Charlotte has an average
house cost of $180K which requires a salary of $49K a year and Raleigh’s
average house is $230K, which requires a salary of $63K per year.
In the Triangle we have been blessed with an above average economy.
Rapid population growth has overcome many negative effects of a
slow national economy. United Van Lines says North Carolina is the 5th
leading place where folks move. There is an endless lists of “best of’s”
where various Triangle towns appear. One of my recent favorites was
Forbes Magazine naming Durham as the #1 city in the US for working
women. The average income for a working adult in North Carolina is
$44,969. A survey of each of the 100 counties in the state shows that
Durham, Orange, Wake and Mecklenburg (Charlotte) counties’ average
income is more than 10% above the state average. Forsyth County
(Winston-Salem) was the only other county above the state average.
The nation may be walking a tightrope economically but the Triangle
is a solid investment. For the time being mortgage interest rates
seem to want to be slow to rise while home prices are increasing at a
solid pace. This of course means it is a good time to buy. And with inventories
at record lows it is a good time to sell. In the long run your home will
continue to be your best investment.