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Thinking about investing in Raleigh real estate in 2025? You might want to reconsider.
While Raleigh has been a hot market in recent years, upcoming changes could make it less appealing for investors.
In this blog post, we will explore why real estate in Raleigh might not be the best investment choice in 2025.
We rely on solid data and statistics from trusted sources to support our analysis.
By the end, we will share our own conclusions based on a thorough examination of the facts. Enjoy the read!
How this content was produced 🔎📝
This article offers thoughtful insights and analysis based on reliable sources, but it should not be considered financial advice. We work hard to research, compile, and analyze data to give you a well-informed perspective. However, as you can guess, our analysis involves subjective choices, such as source selection and methods, and it cannot fully capture the market's complexity. Please, always do your own research, consult professionals, and make decisions based on your own judgment. Any financial risks or losses are your responsibility. Additionally, you should know that we have no affiliation with the sources mentioned, ensuring our analysis is completely impartial.
1) Raleigh's "price-to-rent ratio" stands at 31.0, indicating a notably high level
Signal strength: strong
When considering investing in real estate, it's crucial to look at the price-to-rent ratio, which in Raleigh is currently at 31.0. This ratio is a key indicator of whether buying a property is financially wise compared to renting.
A high price-to-rent ratio suggests that property prices are significantly higher than what you would pay in rent for the same property. This means that it might take a long time to recoup your investment through rental income.
In simpler terms, if you buy a property in Raleigh now, you might be paying more than what the rental market can support. This could lead to lower returns on your investment compared to other markets with a lower ratio.
For a more favorable investment, you would ideally look for a price-to-rent ratio closer to 15 or below, which indicates a better balance between buying and renting costs.
Sources: USCensus, Redfin, Zillow
2) In Raleigh, it typically takes a local about 5.1 years to afford a house, which is quite a long time
Signal strength: moderate
In Raleigh, it would take around 5.1 years for a local to buy a house, which is considered high.
This is a signal that buying property might not be a good investment because the median household income is around $86,309, and it takes a significant portion of this income to afford a home. The median home price is around $437,102, which is quite high compared to the income levels.
When it takes over five years of income to purchase a home, it suggests that homes are less affordable for the average local. This can lead to a smaller pool of potential buyers, which might affect the resale value and demand for properties in the area.
If the time to buy a house were closer to three years or less, it would indicate a more balanced market and potentially a better investment opportunity.
Source: USCensus
We created this infographic to show how property prices in Raleigh compare to other big cities in North Carolina. It shows the median price as well as the price per sqft, making it easy to see which places might offer the best value. We hope you find it helpful.
3) A 10% vacancy rate in Raleigh indicates the market lacks strong competition
Signal strength: moderate
The vacancy rate in Raleigh is currently 10.0%, which indicates that there are quite a few properties available for rent. This high vacancy rate suggests that the market is not very competitive, meaning there are more properties than there are renters looking for them.
When a market is not competitive, it can be challenging to find tenants quickly, which can lead to longer periods of vacancy and reduced rental income. In such a scenario, investing in property might not yield the expected returns, as the demand is not strong enough to support higher rental prices.
In Raleigh, properties that are easily rented tend to be modern, well-maintained apartments located in popular areas like downtown, where there is still some demand despite the overall high vacancy rate. These properties attract tenants who are looking for convenience and amenities, even in a less competitive market.
If the vacancy rate were to drop to around 5% or lower, it would indicate a more competitive market, suggesting that buying property could be a better investment opportunity.
Sources: NeighborhoodScout, DataUSA, USCensus
4) Airbnb or short-term rentals in Raleigh are not very profitable, with returns at just "3.0%."
Signal strength: moderate
The cash-on-cash return on Airbnb in Raleigh is 3.0%, which is considered low for real estate investments. This low return suggests that the income generated from short-term rentals may not be sufficient to cover expenses and provide a desirable profit margin.
In Raleigh, the typical short-term tenants are business travelers, visiting academics, and families attending events. These groups often seek affordable and convenient accommodations, which can limit the potential for higher rental rates.
Additionally, the seasonal demand in Raleigh is not as strong as in more tourist-centric cities, leading to potential periods of vacancy. This can further impact the overall profitability of an Airbnb investment in the area.
For this signal to indicate a good investment, the cash-on-cash return would need to be significantly higher, ideally above 8% to 10%, to ensure a more attractive and sustainable income stream.
Source: Mashvisor
Our team designed this infographic to show how competitive the real estate market in Raleigh is vs. other major cities in North Carolina. It shows the percentage of sales above the list price, a key indicator of market competition.
5) The "cash-on-cash return" of 3.0% for long-term rentals in Raleigh is notably low
Signal strength: moderate
The cash-on-cash return of 3.0% in Raleigh is considered low for real estate investments. This low return suggests that the income generated from the property is not sufficient to cover the investment costs and provide a reasonable profit.
In Raleigh, long-term tenants often include students, young professionals, and families who are attracted to the city's universities and tech industry. These tenants typically seek affordable housing options, which can limit the potential for increasing rental income over time.
With limited rental income growth, the overall profitability of owning property in Raleigh may not meet investor expectations. This situation can make it challenging to achieve a higher return on investment compared to other markets.
If the cash-on-cash return were to increase to around 8% or higher, it would indicate a more favorable investment opportunity in Raleigh.
Source: Mashvisor
So, is it a good time to invest in Raleigh's real estate market? Probably not.
Investing in real estate in Raleigh in 2025 might not be the best idea.
The price-to-rent ratio is at 31.0, which is quite high, indicating that buying a property is much more expensive than renting. This means it could take a long time to see returns on your investment. Additionally, it takes about 5.1 years for a local to afford a house, suggesting that homes are less affordable, which could limit the pool of potential buyers and affect resale value.
The vacancy rate is 10%, showing a lack of strong competition in the rental market, which could lead to longer periods without tenants and reduced rental income. Moreover, the cash-on-cash return is just 3.0%, both for traditional rentals and Airbnb, which is low and indicates that the income generated might not cover expenses or provide a desirable profit margin. These factors combined suggest that Raleigh's real estate market may not offer the best investment opportunities in 2025.
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