September 22, 2010

Hatteras Island Real Estate:
Is the lot market poised for recovery?


Most of the national news reports that we watch and articles that we read about the real estate market locally focus on residential properties rather than unimproved lots.

There can be no doubt that unimproved properties have been especially hard hit in the recent downturn.  Last year, only 30 lots were sold on Hatteras Island by all of the real estate agents from Corolla to Hatteras Village. 

This was the lowest level of sales activity that I have seen since I began keeping records in 1994. Furthermore, the average lot sale price has declined 73 percent from a peak of $401,036 in 2006 to $107,377 during the first eight months of this year.

While these statistics are very sobering, my sense is that we may be seeing early signs of the next upward cycle. Consider these facts:

The inventory of lots for sale on the island decreased 25 percent between August, 2009 and August of this year.

The number of unimproved properties sold from January through August of 2009 vs. the same period in 2010 has increased 171 percent.

The total value of lot sales increased 128 percent during this time frame.

On the other hand, the excess of property supply vs. buyer demand, combined with the influence of distressed property sales, has caused the average selling price of lots to decline by 16 percent when the first eight months of 2009 are compared to 2010 sales results.

There is also an issue concerning the availability of financing for unimproved lots. It is my understanding that only two or three banks are willing to lend on undeveloped properties, and the length of these loans is fairly short.

The theme of “more sales at lower prices” that we have seen in the residential market is equally applicable to the market for building sites. Prices have dropped to the point that they are becoming increasingly attractive to prospective buyers.  To give you just one example of the magnitude of these opportunities, a bank-owned lot on the soundside in Avon that was purchased for $259,000 in 2004 recently sold for $45,000!

While buyers are recognizing the values to be found in today’s market, and sales are increasing, my belief is that before prices can once again head upward, inventories will have to decrease, and the number of distressed properties available for sale will have to significantly decline. 

If you or someone you know has been thinking about purchasing an unimproved lot on Hatteras Island, this seems like an opportune time to explore the market and take action while prices are at or near a cyclical low point.

The game plan that I would recommend is to identify the areas of the island or the communities that appeal to you the most. Then, contact one of our local real estate brokers and ask them to research the prices of available properties. I think you will be both surprised and pleased at the values that are available in today’s market and how affordable it can be to own the home site of your dreams.

(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] )

Copyrightę2010 Tom & Louise Hranicka.  All rights reserved.

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