December 10, 2012

Hatteras Island Real Estate:
Year-end market perspectives


By TOM HRANICKA



As the year draws to a close, it is always interesting to look back and to try to gain some insights into how the real estate market on Hatteras Island has performed. In the past, I have made the comment that the island’s market is like an automobile that is slowly moving forward but not on all cylinders. From what I can tell, this analogy still holds true. Let’s take a look at some of the major market indicators and the implications for buyers and sellers.

Supply vs. Demand

At year-end, the inventories of both residential properties and undeveloped lots that are for sale continued to exceed buyer demand. This is disappointing in the sense that the supply and demand curves were consistently headed toward an equilibrium point until January of this year.  Since then, the two curves have been in a parallel pattern as shown in the following chart.

                     

For sellers, this means that we are still in a price-driven market in which a competitive asking price is their most effective marketing tool. In order to stand the best chance of selling, homes and lots have to offer the most compelling prices among competing equivalent properties.

The message for buyers is that as long as supply is greater than demand, the real estate market on Hatteras Island presents attractive purchasing opportunities.  However, buyers need to recognize that the days of the really great deals are rapidly drawing to a close.

This observation is based on a significant decline in the number of distressed properties in the current inventory. As an illustration of this changing dynamic, 52.4 percent of oceanfront homes sold on the island through November of this year were either short sales or foreclosures. At the present time, among all of the oceanfront properties for sale, there is only one foreclosure and one short sale.  This trend is repeating itself across almost all categories of homes and lots that are being offered for sale.

The silver lining in the supply/demand statistics is that the sales of both residential properties and unimproved lots this year have been up 10.9 percent and 71.2 percent respectively.

Price Trends

Residential prices have shown a slight increase this year, while undeveloped lot prices continued to decline. Whether we are evaluating average or median selling prices, and whether we are looking at all residential sale prices or just single family sale prices, the increases have ranged from less than 1.0 percent to 2.6 percent.

On the other hand, the average selling price of unimproved lots has decreased 15.1 percent, while the median sale price of lots has dropped 26.5 percent.

A balance between supply and demand and an ongoing reduction in the number of distressed properties in the inventory are, in my opinion, preconditions for prices to post a significant recovery.


New Construction

One of the beneficial effects of lower lot prices is that new home construction is starting to show signs of life once again. Buyers are purchasing bargain-priced lots and then building the homes of their dreams. Through November, the number of new single-family building permits that have been issued on the island is up 34.8 percent over the same period last year. Please keep in mind that while the percentage increase is high, the actual number of permits is still fairly constrained (31 vs. 23).

Taking a broad overview of these statistical measures, I think two observations are relevant. One is that the press and media reports stating that a major recovery is underway in the national real estate market overstate what is happening in our local island market.  As you read and listen to these reports, also keep in mind that the largest gains are for the most part being seen in the states that were at the center of the foreclosure crisis.

The other observation that I would make is that, while not booming, our local real estate market is doing quite well considering that, over the past 15 months, we have experienced Hurricane Irene, Super-storm Sandy and two back to back northeasters that have created extended disruptions in access to the island on two separate occasions. Yet, in the face of these severe weather events and their impacts, we have seen meaningful increases in the number of sales and some rise in residential prices. When combined with a decrease in distressed property activity and ongoing low interest rates, I am cautiously optimistic that these trends suggest that 2013 will be a very favorable year for the Hatteras Island real estate market.

(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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