|May 16, 2008
Hatteras Island Real Estate: A market round-up
By TOM HRANICKA
Cycles have always been an elemental part of life on the island. The
tide ebbs and flows. The birds and the fish migrate according to
recurrent patterns, and the winds shift direction as the seasons
change. The island also has its economic cycles. As you read
about the changes that are taking place in the real estate market,
try to get a feel for the underlying rhythms and for the broader trends
that are reflected in the various indicators that we are evaluating.
You may find the charts displayed in the “Market at a
Glance” feature to be helpful in this regard.
The real estate cycle on Hatteras Island changed from a seller’s
market to a buyer’s market during the third quarter of 2005 after
four years of exceptional performance. This was about six months
before the statisticians marked the turning point for the rest of the
country. Hopefully, this head start will translate into a recovery for
the island’s market ahead of the major metropolitan areas.
From the broadest prospective, residential sales results on the island
last year were at a level last seen during the 1997-1998 time
frame. Unimproved lot sales were below those reported in 1994,
the first year for which I have records.
Since the summer of 2005, we have seen the supplies of cottages and
lots increase while the demand for those properties declined. As
the gap between supply and demand has widened, the median selling
prices of both residential properties and lots have decreased.
Residential selling prices have dropped 25 percent, and lot prices are
down 54 percent since the second quarter of 2005.
The good news is that we are starting to see signs of stabilization in
some segments of the market. The relationship between residential
supply and demand has remained relatively constant during the past
year. The number of homes for sale has hovered around 500
properties each month, while the number of sales (calculated at annual
rate) has remained in the 130 to 150 range. The same relativities
have been characteristic of the market for unimproved lots with monthly
supply holding steady in the 325 properties for sale range, and annual
demand staying consistent at 50 properties sold. It is very
interesting to note that in the markets for both homes and lots, we
have not had traditional supply/demand curves for the past 12
months. We have had two parallel lines that look like a set of
With this overview as background, let’s review the island’s
real estate market during the first quarter of this year.
When comparing the first quarter of 2008 to the same period in 2007:
• The number of homes for sale remained essentially unchanged.
• Both the number of residential sales and the
associated dollar volume represented by these sales declined about 20
• However, the median selling price of residential properties rose slightly (5.5 percent) to $442,000.
Unimproved lot sales showed slightly more positive trends.
• The number of home sites for sale declined by 4.3 percent.
• Lot sales rose by 16.7 percent, and the dollar volume represented by those sales increased 3.2 percent.
• The median selling price of lots ($125,000)
decreased by 21 percent in comparison to the first quarter of 2007.
As you evaluate the percentage changes in these statistics, please keep
in mind that we are dealing with a very limited number of sales during
the three month period – 26 homes and 7 lots. The small
numbers can magnify the percentage changes, making changes look larger
than the absolute numbers actually reflect.
The Hatteras Island Pending Home Sales Index
The Hatteras Island Pending Home Sales Index (PHSI) is a leading
indicator of future residential sales. The index measures the
number of residential properties that are under contract to be sold
relative to the average number of properties under contract in 2001,
the first of the recent boom years.
The PHSI provided a bright spot in the first quarter results. The
index increased by 50 percent from January to March compared to a 17
percent decrease during the same period in 2007 and flat results in
2006. While these numbers are encouraging, I am a little hesitant to
get too excited about this increase. Last year, we were
sandbagged into thinking the bottom of the market may have been reached
in April when the index showed an upward trend for the following four
months. Then, a decline to a new low point set in during the
subsequent five months.
Geographic Distribution of Sales
Recognizing that a limited number of sales were reported during the
first three months of the year, buyers showed a clear preference for
residential properties located on the oceanside. Half of the reported
transactions were concentrated at the south end of the island in the
villages of Frisco and Hatteras. In contrast, soundside
properties were the focal point for unimproved lot sales, with Avon
recording the largest number of transactions.
In my last article I noted that the only way that any of us are
probably going to know that the bottom of the market has been reached
is when prices start to rise. At the same time, reasons for
guarded optimism about the future are starting to appear:
• The number of property viewings on the
internet has noticeably increased this year. A recent national
survey showed that about 84 percent of prospective buyers use the
internet in their search for property, and many begin their initial
• The number of property showings and properties
placed under contract have risen steadily since the beginning of the
• There appears to be a significant pool of cash
available to fuel pent-up demand for vacation properties.
According to a national news report, $3.5 trillion are currently
sitting on the sidelines in money market funds.
• According to the National Association of
Realtors, despite negative media reports about the state of the
national real estate market, second home purchases represented
one-third of all residential sales across the country last year.
• With increasing frequency, news articles are
starting to appear that suggest the time may be right for buyers to
venture back into the real estate market.
Hatteras Island is truly a unique place. It’s natural
beauty with vast areas of unspoiled beaches, dunes and wetlands, will
always hold a very special attraction for those seeking a peaceful
respite from the frantic pace of the outside world. There is no
doubt that financial factors and other forces that are less easily
quantified will produce recurring cycles in the real estate market and
in the economy of the island.
However, when all is said and done, there really is no place like
Hatteras Island. We can travel the world in search of exotic
locations and places to find solitude, but the feeling that each of us
gets when we cross the Oregon Inlet Bridge somehow triggers that quiet
voice inside our minds that always says, “Welcome
home!” This is the force that has drawn people to the
island for more than 400 years, and it is the force that will sustain
the island and those who love it for as far as any of us can see into
the future. It is also the force that will ultimately sustain the real
(Tom Hranicka is an
associate broker with Outer Beaches Realty. Questions, comments, or
suggestions for future articles may be sent to Tom Hranicka at P.O. Box
237, Avon, NC 27915, or e-mail to [email protected] )
Copyright©2007 Tom & Louise Hranicka. All rights reserved.