Step 1: Have a Dream (But Know the Odds)
Despite an unfortunate paint job, the house on East Hargett Street was the one.
Just under nine hundred square feet, it had everything I wanted: close to downtown Raleigh, a kitchen I could work with, room to grow (but not too much). An hour earlier, I’d spotted the day-old listing on Zillow and emailed my realtor. Now, I was standing in the living room, imagining where I’d put my clawed-up red couch and crammed bookshelves and picturing my cats lazing about in the fenced-in backyard.
Better: It was a seven-minute bike ride from Battery Heights to downtown.
Best: It was within my budget, or close enough.
Two days later, on May 30, I submitted my bid: $206,000, $1,000 over the asking price. Another time and place, that would have been more than enough.
But this being Raleigh in 2019, several other people submitted bids, too. And we all lost to a national development firm.
My dream home is about to be gutted, renovated, and flipped—or, worse, razed and replaced with a chic half-million-dollar box with open floor plans and balconies from which to watch the rest of the neighborhood “improve.” Such architectural harbingers of revitalization dot the street with increasing frequency as you head downtown.
Either way, it will no longer be my dream home. And I won’t be able to afford it, anyway.
Such is the pursuit of the American Dream for first-time Raleigh homebuyers like me: hard, fast, and heartbreaking.
Before we go further, an acknowledgment: I didn’t come to this home-buying adventure from a place of adversity, but one of privilege, generational wealth, and downright luck.
Journalism doesn’t pay much, but my parents offered to help with the down payment, as their parents had done for them. And I don’t have much debt—about $20,000 in student loans, $2,000 on credit cards, no car payment, and I’ve managed to avoid any bankrupting medical catastrophes in my twenty-nine years on earth.
But even with all that going for me, trying to buy a house often felt impossibly frustrating, and sometimes simply impossible.
My generation isn’t committing to homeownership like our parents and grandparents did. Just 37 percent of millennials between the ages of twenty-five and thirty-four own a home, according to a 2018 Urban Institute study, down from 45 percent of Gen Xers and baby boomers when they were that age. There are lots of factors at play: more student loan debt, which makes it hard to scrape together a down payment; increased diversity, as people of color are less likely to buy a home than whites; delaying marriage, as nuptials (and dual incomes) increase your likelihood of buying a home; and millennials’ gravitation toward downtowns in high-skill cities—in other words, we want to live in places where many of us can’t afford to buy.
It’s that last one that’s most relevant to my situation.
The notion that homeownership is the gateway to financial stability—that you should build equity instead of paying off your landlord’s mortgage—is a fundamental tenet of the American ethos, grounded in the ethic of rugged individualism and the postwar idealization of picket-fence suburbia.
But for many middle earners in Wake County, that ideal can prove elusive.
It’s Econ 101: The housing stock isn’t keeping pace with a fast-growing population, so prices are rising. Between 2010 and 2017, Wake County’s population grew by about twenty-four thousand residents a year. During that period, the county added between ten thousand and twelve thousand housing units a year. You see the problem.
Wake’s median household income was just under $78,000 in 2017, according to the Federal Reserve Bank of St. Louis. In May, the median sales price of a Wake County home was more than $320,000, according to the Triangle MLS. If you apply the common wisdom that you shouldn’t pay more than three times your income for a home, that means the county’s median household can’t afford the county’s median house.
And for those earning less than $50,000 a year—schoolteachers, firefighters, police officers, people in the service industry, certain late-twentysomething journalists—shopping for a home usually presents a choice: learn carpentry skills or buckle up.
“If you are a modest-income professional, buying a home either means doing a lot of fixing up yourself, or it means going to the fringe with a long commute,” says Duke economics professor Charles Becker.
When I started house-hunting a few months ago, it was, at best, a half-hearted effort. It began with an offhand suggestion from my editor that I try to buy a house and write about the experience; I had no intention of actually buying anything. But the deeper I dug into the process—obsessing over online listings, furiously emailing my realtor whenever something interesting popped up—the more the allure of owning my own house tugged at me.
I’m almost thirty. For so long, I’ve felt like I’ve been waiting for my life to start. But lately, I’ve realized that it’s happening—right here, right now. I want to start thinking about starting a family (even if it’s not a conventional one). I want to have something to show for myself financially. And maybe, though it had never occurred to me before, I really do want my own piece of the American Dream.
So I decided to give homeownership an honest-to-god shot. This is what happened.
Step 2: Get a Mortgage (and Thank Your Mom)
The first important number: $200,000.
That’s how much that broker James Hedges told me I’d prequalified for.
I understood the basics of how a mortgage works—a bank gives you money, you pay it back with interest for thirty years—but I only vaguely grasped how my lender figured out how much I could afford, what type of loan I qualified for, and how much interest I’d have to pay.
That, Hedges told me, comes back to my debt-to-income ratio: how much I owe versus how much I make. Then the lender runs a credit score to assess how reliable I am about making payments.
Which brings us to the second important number: 698.
That’s considered good—twenty-three points better than the 2017 VantageScore national average, but six points below the 2018 FICO average.
But it’s also misleading. Deep in my credit report is an American Express account opened in 1982—seven years before I was born—with a low balance on a high limit that I’ve never seen or used. My parents had opened it and added me as a user, in the process making me appear to have a better borrowing history than I actually do.
Score one for Mom and Dad.
The better your credit, the better your options. Scores above 580 qualify you for a Federal Housing Administration loan; above 620, you can get a conventional loan. FHA loans require lower down payments (3.5 percent) but can have higher monthly payments and come with more strings attached. Conventional loans typically require at least a 10 percent down payment—yeah, right—but have a lower interest rate.
Hedges nudged me toward an FHA loan, which allows a higher debt-to-income ratio, meaning I could spend almost half of my paycheck on my mortgage payment. He said I would also qualify for the NC Home Advantage Tax Credit, a program that allows first-time and military veteran homebuyers to claim an income tax credit worth 30 percent of my annual interest payments, up to $2,000 a year. That’s $167 a month in savings.
With a 4.5 percent interest rate, I’d pay $995 a month on my $200,000 loan, about $100 less than I’m currently paying to rent a six-hundred-square-foot downtown apartment. Not bad.
But then come property taxes. Including Wake County’s recent 10 percent hike, a $200,000 house will set me back about $2,300 a year in city and county taxes. And don’t forget insurance and mortgage insurance.
Put it all together, and you get the third important number: $1,358.
That’s how much I’ll pay every month for a $200,000 FHA loan.
After I pay my student loan, that leaves me with less than $200 a week to live on: food, cat food, gas, utilities, or, god forbid, an emergency. Going out? Unlikely.
At first, that was a depressing thought. But I realized that my disposable income would only be about $75 a week less than it is now. I could keep brown-bagging my lunch and mostly breaking even, and at least I’d own something for my trouble.
Here again, I’m fortunate to pay only $200 a month in student loans. Hedges says he’s seen teachers who make $35,000 a year but have more than $200,000 in student loans, which means they’re paying well over a grand a month. Banks won’t take the risk.
“That’s a house payment right there,” Hedges says. “If you paid face value for college, it would equal a home loan when you graduate.”
Lenders have tightened up since the 2008 crash, says Becker, the Duke professor. The Great Recession came about largely because of unscrupulous lending practices—high-interest loans issued to high-risk borrowers, who defaulted. The wave of defaults led to the fiscal crisis and the stock market crash. That, in turn, depressed the housing market, which left millions of people owing more for their homes than they were worth.
The market, of course, has recovered (and then some) over the last decade. Becker says he expects another crash eventually, though not in the next year or two.
Perhaps the possibility that I was trying to buy near the peak of the housing cycle should have given me more pause than it did. But I had my pre-qual in hand, and I was ready to shop.
“We want to be ready to go,” Hedges advises. “Especially in this market, we’ve got to be ready to move fast. First-time homebuyers are missing out on more homes because by the time you talked to an agent, get pre-qualified, it’s three days later and the house is already under contract.”
Step 3: Move Fast (and Check for Squatters)
The carport barely hanging over the driveway looks one strong gust away from collapse. The Southeast Raleigh fixer-upper on Sunnybrook Lane is listed for $150,000, well within my budget, but “fixer-upper” is too polite a term. Debris is strewn about the backyard. Everything screams bad vibes.
“Because of the state of the property, I am checking for a squatter before we go in,” says realtor Shannon Brien.
Open the front door, and you’re hit with the smell of mold and mildew. The wood floors are stained with what Brien believes is animal or human urine. There are unsightly brown stains on the wall and dirt everywhere. A kitchen cabinet is full of green mold. Most problematic, the floor dips in peculiar ways, leading Brien to believe there may be issues with the foundation.
Renovations would probably cost more than $70,000. Even if I wanted to bite that bullet, the FHA would never sign off.
The Sunnybrook nightmare is less than a minute drive away from a house on Cooper Street, a recent flip listed for $200,000. You can tell it’s a flip, Brien says, because there are hardly any “signs of life”—minor stains or scratches that betray activity. The walls are painted a brilliant white. The new granite countertops gleam. There are three bedrooms and barbed wire on the fence guarding the backyard, hinting at a past painted over for a premium.
We look at another house in the same neighborhood listed for $210,000. The brick has been painted a soft shade of gray, and the door is bright red.
“It looks like it doesn’t belong,” Brien says.
The other houses on this street have yet to undergo such a makeover. Another flip, it smells like fresh paint. There are kitschy mugs on the kitchen counter with “Mr. and Mrs.” embossed in cursive letters. It’s small for a three-bedroom.
It will sell quickly, Brien says.
Homes like this hit the market and receive dozens of offers within days, sometimes hours, sometimes in all cash. The result, especially in historically low-income parts of the city—the last places inside the Beltline where acquiring single-family houses for under $300,000 is even conceivable—is rapid gentrification.
In May, The New York Times took note of a trend that’s been obvious to local real estate agents, policy makers, and housing advocates for years: Small homes throughout Southeast Raleigh are being scooped up, renovated, and resold to mostly white buyers, transforming longtime black neighborhoods into hip hamlets where the price of admission edges a half-million dollars.
This dynamic is playing out in cities all over the country: Black renters are being pushed out by rising rents—40 percent of Wake renters are already considered cost-burdened, and Triangle rents rose 4 percent in 2018 alone—or landlords who want to cash out as their once-downtrodden neighborhoods become hot commodities. Black homeowners are facing higher taxes as their property values go up or simply see an opportunity in a booming market.
And as with so many things, the problem of gentrification inexorably traces back generations and has its roots institutionalized white supremacy.
As education and housing policy expert Richard Rothstein explains in his 2017 book The Color of Law: A Forgotten History of How Our Government Segregated America, federal policies enacted during and after the New Deal prevented most African Americans from obtaining the home mortgages they needed to buy into the burgeoning suburbs to which whites flocked after World War II. Instead, they were left to languish in deteriorating and ignored urban neighborhoods.
(Because they couldn’t purchase homes, they also couldn’t build equity and pass along generational wealth. African Americans still lag whites in homeownership—41 percent to 71 percent, according to The Urban Institute—and the divide is worse among younger people.)
Things began to change around the turn of the century when downtowns started regaining their mojo. Suddenly these “undesirable” neighborhoods became places where you could buy cheap and live close to the downtown action, or renovate older homes and make a mint on the resale.
The story begins a little differently in Raleigh. Before the 1920s, Rothstein writes, African Americans lived throughout the city, especially in thriving sections of North Raleigh. The city’s white leaders, however, wanted to concentrate the black population in the southeast, near a dump and a rock quarry full of stagnant water. The problem was that the U.S. Supreme Court had forbidden municipalities from using zoning to create blacks-only neighborhoods.
In stepped Raleigh’s school board: Because the Supreme Court allowed school segregation, it simply located the black schools in Southeast Raleigh and refused to bus students in from other areas.
Within a decade, Southeast Raleigh was a black neighborhood, and it remained so for much of the twentieth century. Like many black neighborhoods in the South, it suffered from neglect, with some (but not all) pockets beset by crime and poverty. Then came downtown’s renaissance. And as the value of their neighborhoods rose, the African Americans whose families had lived in Southeast Raleigh for decades could no longer afford the houses being sold to their new white neighbors.
“As we continue to grow, where are these people supposed to go?” Brien asks.
Step 4: Prepare for Disappointment (or Learn to Love the Hinterlands)
Olivia Robinette and Evan White are holding hands, walking through the backyard of a one-story ranch-style house in Fuquay-Varina. It boasts tall trees and spans nearly an acre, more than enough room for the couple’s chocolate Lab.
After months of looking—and being outbid on several houses closer to Raleigh’s Moore Square Middle School, where Robinette works as a middle school teacher—this house sparks optimism.
“We could get married in this backyard,” Robinette says.
It would be about a half-hour commute, but other teachers drive farther. Some of her co-workers live in Johnston and Harnett Counties, where you can still buy a big house on an educator’s budget. Robinette has toured about fifteen houses so far, some she really liked, but she didn’t move fast enough. Besides, closer to Raleigh, houses came with tiny lots and big mortgage payments. In Fuquay-Varina, they could get a big lot and a smaller payment.
She’s going to make an offer, she decides.
Other millennials have had luck in Wake’s smaller towns, too—though who knows how much longer that will be possible. Jacob Bowen, a twenty-three-year-old sheet metal fabricator, lived with his grandparents for three years while he saved up money to buy a house in Youngsville. He paid $160,000—after being outbid for other houses six times over eight months.
Dave Shay, a twenty-nine-year-old photographer, earns about $85,000 a year working two jobs, but he didn’t even bother looking in Raleigh. The day after touring a house in Holly Springs, he offered $270,000 for it.
“The fear was, if we don’t buy something soon, we’re not going to be able to afford anything in a few years,” he says. “The market was going up just about as fast as we were saving.”
I looked at places in the suburbs, too: There was the home in Wake Forest with a ton of land and lots of modern fixtures, but I couldn’t stomach the thought of spending an hour a day on Capital Boulevard. There was the cute house in Wendell, but that commute would also have been miserable. Then there was the new construction near Fuquay-Varina’s blossoming downtown, a modern ranch with an open floor plan on the market for $210,000. It was built by a nonprofit specializing in affordable housing. The paint was barely dry, and the whole place stank like sawdust. Someone else’s affordable dream, perhaps.
I could have moved to North Raleigh. I looked at a lime-green two-story home outside the Beltline; the fixtures reminded me of my grandmother’s house. I also found a house in a golf community within city limits. I’ve never played golf, but the high ceilings had some appeal. The dead roach on the carpet did not.
At heart, though, I’ve always been a city girl. I want to live in Raleigh, as close to downtown as possible. I want to bike to work. I want to live near the retailers and bars and restaurants I like to frequent (even if living there meant I couldn’t afford to frequent those places).
But checking all of those boxes presented a moral quandary: Would I become just another gentrifier with a bright red door, contributing to, and eventually profiting from, what seems like an inescapable tide of displacement?
That thought left a bad taste in my mouth.
Affordable housing is the number one issue in this fall’s city elections. Everyone agrees it’s a problem, though there’s no consensus on how to fix it. We know there will probably be a housing bond on next year’s ballot. We also know that some incumbent city council members are pushing developers to “voluntarily” add affordable units to get their projects moving—under state law, the city can’t compel them to do so—while challengers are pushing for more density, betting that having supply match demand will keep prices from rising too much too fast.
But no matter what, houses aren’t going to get cheaper.
In the end, I didn’t buy a house. Or rather, I haven’t bought one yet.
I looked at a dozen houses, was sort of interested in three, and put in an offer on one. Despite my longsuffering realtor and patient mortgage broker doing the heavy lifting, I still found the whole exercise emotionally exhausting: the high of hope on Hargett Street, the low of losing it, and the Goldilocks-like slog of seeing home after home that wasn’t just right.
Even so, I might get back in the game. Brien still sends me listings. They appear like little bursts of hope in my inbox.
Perhaps I’ll rethink my parameters and start looking at condos and townhouses, even though sharing a wall with my neighbor is the very thing from which I’d like to extricate myself.
Who knows. If adulthood has taught me anything, it’s to continually downgrade my expectations.
Contact staff writer Leigh Tauss at firstname.lastname@example.org. Support independent local journalism. Join the INDY Press Club to help us keep fearless watchdog reporting and essential arts and culture coverage viable in the Triangle.
Editor’s note: The INDY would like to thank realtor Shannon Brien and mortgage broker James Hedges, who donated their time for this story.
How to WIN at Buying a Home
As Triangle home prices continue to rise, millennials will need to make compromises when shopping for homes. While you may not get a home within the beltline, there are still good values to be found in surrounding communities like Johnston county. It may not be centrally located, but the entire Triangle is rapidly changing. Downtown Clayton used to be a ghost town in prior years, but now has many wonderful bars, breweries, and restaurants, as well as farmers markets and events. Also, millennials might find that as they age, living downtown, with growing crowds and traffic jams, starts to lose its appeal.
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