February 12, 2008


Hatteras Island Real Estate:  It’s a great time to be a buyer

By TOM HRANICKA

How many times have you sat on the deck of your vacation cottage and commented, “Wouldn’t it be great to have a home here on Hatteras Island? We really should look into what it might take to buy a house or a lot.”  You may be surprised to learn how easy it can be to make your dream come true. Conditions in the real estate market are currently very favorable for buyers.

It is no secret that real estate is a cyclical business.  There are times when market forces favor the sellers of properties and other times when circumstances favor buyers. Since the summer of 2005, we have experienced a buyer’s market on Hatteras Island.  This has created an environment that makes it an opportune time for anyone thinking about buying a cottage or lot on the island to turn their thoughts into action. Consider these factors:

  • With almost 450 residential properties and 300 unimproved lots being offered for sale, prospective buyers now have a very broad selection from which to choose. One of the indicators of a “buyer’s market” is a supply of properties that significantly exceeds demand.  On Hatteras Island at the end of 2007, there was a 3.6 year supply of homes for sale and a 6.7 year supply of lots.
  • As a by-product of the increased supply of properties relative to buyer demand, prospective buyers should find the purchasing environment less stressful.  There is less competition among buyers for the available properties. There are fewer buyers looking at properties, and there are increased inventories of homes and lots, which give buyers a wide range of choice.
  • Given the wide gap between supply and demand, both the listing prices and the selling prices of properties have already dropped by a significant amount.  Between June 2005 and December 2007, the median selling price of residential properties decreased 44 percent, and unimproved lot prices declined 23 percent.
  • In addition to the price decreases that are being seen, buyers may find sellers more willing to offer concessions during contract negotiations.  Examples might include the seller paying a portion of the buyer’s closing costs, the seller “buying down” the purchaser’s interest rate by paying loan points, and, in some cases, the seller guaranteeing a specific dollar amount of rental income for the first full year of ownership.
While underwriting requirements have become more rigorous across the spectrum of loans, financing is readily available for qualified buyers on the Outer Banks, and the cost of borrowing is reasonably inexpensive.

  • Interest rates are near historical low points. Low interest rates make properties more affordable and provide a strong incentive to purchase before rates once again head upward.
  • The interest rate recently offered through a major lender for 30-year, fixed-rate conforming loans (loan amounts of $417,000 or less) was 5.625 percent with no points. A point equals one percent of the loan amount.  The interest rate for jumbo loans (loan amounts in excess of $417,000) was 6.25 percent with the payment of one point. Check with your Realtor for current rates.

Fear-based headlines like “Mortgage Meltdown,” “Home Implosion,” and “Credit Crisis” that we have seen in the national media can cause all of us to think that the best course of action might be to sit on the sidelines, do nothing, and wait for prices to decline further.  The fact is that the nightly national reports that we see and hear often say little about what is actually happening in the Hatteras Island real estate market.

As you read the newspaper and watch television, keep two or three things in mind.  First, real estate is cyclical, and it is a long-term investment.  The reports that we are watching and reading focus on the short-term crisis du jour.   Second, every real estate market is local. While there can be no denying that events in the outside world have some effect on the Hatteras Island market, the statistical profile for our resort environment is quite different from the national, primary residence market that is the basis for the reports. Third, as we have seen, our government is not going to sit idly by and let an economic collapse occur, especially in an election year.

Experts agree that, except by pure luck, it is highly unlikely that anyone can time the market and purchase at the exact bottom. Most of us end up buying after the bottom has passed, and a clear upward trend is evident.  During this phase of the real estate cycle, prices will have begun to rise, and there will be more competition among buyers for the same properties.  In addition, the cost of borrowing can be expected to increase.  This fairly common scenario leads to the observation that, all things considered, it is probably more beneficial for buyers to make their purchases during the later part of the down cycle in real estate markets rather than waiting until the market bottom has been confirmed.

In summary, now is an especially good time to investigate the benefits of owning a place at the beach.
  • There is a wide selection of properties from which to choose.
  • The purchasing environment is less stressful.
  • Prices on Hatteras Island are very attractive relative to other resort areas.
  • Properties can be expected to cost more in the future.
  • Resort real estate has performed very well as a long-term investment.
  • Second home sales now account for about 36 percent of all residential transactions across the country.
  • Most importantly, there is no place like Hatteras Island!

Your real estate broker can help you to find the right property, determine what comparable properties are selling for, assist with paperwork and negotiations, and help to arrange financing.


It really is a great time to be a buyer on Hatteras Island!
   

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