August 22, 2011


Hatteras Island Real Estate:  Anatomy of a buyer’s market, Part II

By TOM HRANICKA




In my last article, I shared an overview of several dimensions of the buyer’s market that began on Hatteras Island in June, 2005.  One part of that analysis observed that the average selling price of residential properties declined over 41 percent between 2005 and 2009. 

While this is a statistically accurate portrayal of the historical price behavior, it is a little like saying that the average temperature of the United States in July was 77 degrees.  We really need to have more specific information to understand what the weather was actually like in any particular location.

There are many different ways to sift and sort statistical data.  In order to get a more detailed picture of the impact of the recent downturn on different segments of the island’s real estate market, I researched the changes that occurred in the average residential selling prices of various types of properties according to where they were located in relation to the ocean.

 I examined six different categories of homes – oceanfront, 1-lot back from oceanfront (semi-oceanfront), soundfront, canalfront, oceanside, and soundside.  Some interesting, and sometimes surprising, observations emerged from this analysis.

If you were to guess which type of property declined the most during the past six years and which decreased the least, what would your answers be? 

According to the records, cottages located 1-lot back from the oceanfront held their values best, declining 34 percent from their peak in 2006.  On the other hand, I found it somewhat surprising that soundfront homes lost the most value, decreasing 64 percent between 2006 and 2009.

This result was, no doubt, influenced by a spate of lower priced condominium sales in 2009.  Following the trend of the overall market, both semi-oceanfront and soundfront homes have once again started regaining value.

Using the experience of the last cycle of declining prices in the early 1990s, I would have thought that oceanfront homes would have fared well in both up and down markets.  However, this buyer’s market hit oceanfront properties hard, reflecting a price decrease of 51 percent between 2005 and 2010. 

The conventional wisdom has usually been that buyers who can afford to purchase high demand oceanfront properties may be less impacted by the swings in the economic cycles.  However, in this downturn, just about everyone was affected. In addition, financing for high-end properties all but disappeared after the national financial crisis that began in 2008.  Another factor was the emergence, beginning in 2008, of foreclosures and short sales which have had a dampening effect on the prices of all types of properties.

Canalfront homes, following the pattern of the general market, recorded a decrease in their average selling price of 42 percent. With a current average selling price in the $293,000 range, I personally believe that canalfront properties are worth the careful consideration of buyers seeking affordable waterfront cottages.

Finally, homes on the oceanside and soundside that were neither waterfront nor 1-back from oceanfront, declined 50 percent and 36 percent respectively during the most recent slump.

As I mentioned in the previous article, it appears that residential selling prices for the most part bottomed out in 2009 and are now in a slow recovery.  The only exception to this statement may be oceanside homes which have seen prices that continued to drop through the first six months of this year.

The following table summarizes the changes in average residential selling prices from their highs to their lows and from their high points through the first half of this year.

HATTERAS ISLAND AVERAGE RESIDENTIAL SELLING PRICE SINCE 2005


HIGH TO LOW

HIGH TO 6/30/2011

TOTAL RESIDENTIAL MARKET

-41%

-39%

OCEANFRONT

-51%

-46%

1-LOT BACK FROM OCEANFRONT

-34%

-31%

SOUNDFRONT

-64%

-51%

CANALFRONT

-42%

-35%

OCEANSIDE

-50%

-50%

SOUNDSIDE

-36%

-32%




As you review these comments and statistics, keep in mind that properties in different locations, did not all hit their high and low points at the same exact time.  While oceanfront, canalfront, and oceanside homes peaked in 2005, soundfront, semi-oceanfront, and soundside cottages reached their maximum price points in 2006.  Similarly, the market as a whole bottomed out in 2009, yet most of the property categories hit their low points in 2010.

Remember, too, that everything you have read in this article and the last column represents historical information.  Looking in the rear view mirror is fairly easy to do.  The real challenge is to attempt to peer into the future.

I think we will continue to see the number of sales continue to increase, but selling prices will remain constrained for the foreseeable future due largely to the influence of short sales and bank-owned properties. 

I don’t believe that it would be an exaggeration to state that all of the Hatteras Island real estate market is on sale at the present time. Prices are still close to their cyclical bottom.  Interest rates are unbelievably low, making properties very affordable, and, there is a good selection of homes and lots from which to choose.  In a nutshell, it’s a fantastic time to buy on Hatteras Island!


(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] )
Copyrightę2011 Tom & Louise Hranicka.  All rights reserved.





 Comments are always welcomed!


     Subject :

     Name :  (required)

     Email :  (required, will not be published)

     City :   (required)    State :   (required)

     Your Comments:

May be posted on the Letters to the Editor page at the discretion of the editor.