February 9, 2012

Hatteras Island Real Estate: 2012 market predictions


A number of well-informed professionals have observed that the real estate market on the Outer Banks runs in 10-year cycles. If there is any substance to this comment, then I think it is fairly safe to say that the market appears to be stabilizing and forming a foundation for its next movement upward. The current market momentum could be characterized as trending toward stabilization with a slight downward bias.

Sometimes the future can become a little clearer if we look at the past.  The following graph shows the trends in average residential selling prices since 1994.

My sense is that we have at least another year or two of flat selling prices, mainly because of the continuing inventory of foreclosed properties and short sales that place a ceiling on price appreciation. 

The good news is that the number of foreclosure filings has decreased on the island for the past three years, and the number of distressed property sales has increased. Last year, distressed property sales represented 56 percent of the total residential sales on Hatteras Island and 54 percent of unimproved lot sales.

Another positive factor among local market indicators is that the supply and demand curves for residential properties have been steadily moving closer to each other. I am anticipating that the two curves will meet in 2012, setting the stage for a transition from the current buyer’s market to a seller’s market once again. 

At the same time, I believe that any price appreciation that we experience will be modest compared to the extraordinary run-up that we saw between 2001 and 2005.

The market for unimproved lots will take a little longer to recover since prices just started showing signs of stabilizing for the first time last year, and those supply and demand curves are still fairly wide apart.

It was also encouraging to note that during 2011 we saw a glimmer of interest in the higher priced properties ($1 million-plus) with three properties sold in this range.

All things considered, I am looking forward to more sales at flat to somewhat lower prices on Hatteras Island in 2012.

While the focus of our interest is Hatteras Island, we do need to keep an eye on the world outside our shores for events and patterns that could affect us.  As an example, a very highly regarded real estate trends report (Swanepoel Trends Report 2012) is expressing concern about the faltering European economy and the potential that exists for exporting a potential recession in Europe to the United States. Unemployment and underemployment, low levels of consumer confidence, and ongoing tight credit are national issues that are generating apprehension.

Looking at the national real estate market, the predictions are strikingly similar to those for Hatteras Island – rising sales, flat to declining prices, falling inventories of properties for sale, and high levels of foreclosures and homeowners in negative equity situations.

Interest rate levels are expected to remain low, but if people don’t have jobs and loan underwriting stays restrictive, then it is going to be difficult to generate any significant improvement in real estate results in most places across the country.

As the government looks for additional sources of revenue, there is backroom talk in the halls of Congress about eliminating some of our most cherished tax deductions, such as the mortgage interest deduction, deductions on second homes, and deductions for state and local taxes. You can be assured that the National Association of Realtors has given these discussions a very high priority, and for the rest of us, they certainly bear close watching.

To place these comments in perspective, when you think about it, there are always positive and negative events and trends that exist at any given point in time. Nonetheless, when real estate is considered for the long term, it has almost always been a good investment.

So, let’s keep our eye on the ball and realize that the real estate market operates in cycles. Right now, I honestly believe we are in one of the best purchasing environments that anyone may see for a long time to come.

(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 2012 Tom & Louise Hranicka.  All rights reserved.

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