Hatteras Island Real Estate: Top stories of 2009
Each year, several unique aspects of the real estate market seem to
define and to summarize the multitude of statistics and trends that
play out on the island over the 12-month period. Last year was no
exception to the rule. In many ways, the top stories of the
year were uplifting in their underlying messages.
Here are my candidates for the top stories about the Hatteras Island
real estate market in 2009.
Signs Of Market Recovery Emerged
In my opinion, the number one story was that as the year progressed,
there were increasing signs that the real estate market had finally
turned the corner and was on the road to recovery. The
indicator that the island’s market was improving was that the
number of residential sales increased by almost 45 percent over
2008. Prospective buyers echoed this positive sentiment when
colleagues and I often heard statements like, “I am not sure
whether the market has actually reached bottom, but I think that it is
close enough so that I don’t want to miss out on the next upward
Like any reported event, there was also a “back story”
behind the numbers. While everyone was extremely happy to see
sales increasing, the upward trend was limited to residential
properties priced below $600,000 with the highest number of sales
restricted to the price ranges of $400,000 and below. Higher
priced sales were severely limited with only seven sales of $700,000 or
more and just two sales over $1 million. In addition, the
of unimproved lots dropped to the lowest level since I began tracking
market data in 1994.
Three other trends supported the conclusion that the bottom of the
cycle may have been reached last year:
• Average residential selling prices
closer to the historical growth curve that we saw prior to the boom
• Property supply and demand curves
move closer toward each other after being almost parallel for a number
• The Hatteras Island Pending Home Sales
a leading indicator of future sales, remained above its previous
long-term downward trend for the last 10 months of the year.
A significant rise in the number of foreclosure filings was my
candidate for the second most important story of the past
During 2009, the number of foreclosure filings for residential
properties and unimproved lots climbed nearly 75 percent above the
levels recorded in 2008. On a cumulative basis, there were almost as
many foreclosure filings on the island as there were closed sales of
home and lots.
This increase mirrored trends that were seen in real estate markets
across the country. Unemployment, declines in the value of retirement
assets and investment accounts, and falling property values merged with
difficulties in refinancing mortgage loans to make it difficult for
many owners to keep up payments on their properties. This pattern in
distressed properties is projected to possibly get worse before it gets
better, as interest rates on No Documentation and Option ARM loans
acquired during the boom years enter their reset period over the next
While the heightened number of foreclosure filings and subsequent
foreclosure sales was noteworthy in and of itself, the impact that this
tragic set of circumstances had on the selling prices of properties was
a very important secondary impact.
Despite the increased number of sales that occurred during 2009, the
average selling price of residential properties on Hatteras Island
dropped 38 percent last year, and the average selling price of
unimproved lots declined by 48 percent. The combined effects
the supply of properties exceeding buyer demand, foreclosed property
sales, and short sales (the mortgage amount exceeded the value of the
house/lot) caused selling prices to continue to fall.
The theme of more sales at lower prices can be expected to persist
through at least the end of 2010.
Rates Remained Steady
An important factor contributing to the increase in residential sales
was that interest rates remained low throughout last year.
was little, if any, change in the interest rates for conventional
30-year fixed rate loans in amounts of $417,000 or less during
The interest rate of 5.125 percent with no points was fairly
consistent, although there were times when the rate dropped below 5.0
percent. Interest rates for “jumbo” loans (those in
excess of $417,000) actually declined over the course of the year from
6.875 percent plus 1 point to 5.875 percent plus 1 point.
However, this decrease was not enough to overcome more stringent loan
underwriting and downpayment requirements for higher priced
properties. The forecast for 2010 is that interest rates will
rise to between 5.5 percent and 6.0 percent as inflationary pressures
resurface in the national economy.
Market On A Roller Coaster
This time last year, rental managers up and down the Outer Banks were
gasping for air as reservations for the 2009 season were off by as much
as 25 percent from 2008 levels. As you recall, during the
quarter of 2009, the financial system was in dire straits, and people
were just plain scared. They did not want to commit to the
expense of their annual vacation while they were unsure what the future
might hold for them.
Then, as the economic crisis eased, and consumer confidence began to
rise, rental bookings increased as well. By year-end, the
of rental weeks recorded in 2009 was at or near the same level reported
in 2008. Looking back, 2008 could be described as an
“average” year for the vacation home rental market on
Hatteras Island, 2009 could be characterized as “soft,”
and, 2010 is projected to be “improving.”
In summary, I think it would be fair to say that we are seeing the
early signs of recovery in the Hatteras Island real estate
market. Long-time observers of local economic trends often
about there being a 10-year cycle in the real estate market.
we date the start of the most recent upward cycle at 2001, then the
current upturn appears to be right on schedule.
I believe that we should anticipate a gradual recovery versus a rapid
turnaround, and I think that it would be reasonable to expect some
setbacks along the way as foreclosures increase and events on the
national stage play out.
As we try to peer into the future, let’s always remember that
there is no place like Hatteras Island, that in a very real sense
property on the island is a scarce commodity, and that owning a place
near the ocean is an important part of the American dream.
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]
Tom & Louise Hranicka. All rights reserved.