June 3, 2013

Hatteras Island Real Estate:   Conversations with buyers


Last month, I wrote about the conversations that my Realtor colleagues and I have been having with sellers. In this article, I would like to share discussions that we are currently having with prospective buyers.  The central theme of these conversations is quite simply – it’s a great time to be a buyer on Hatteras Island!

According to the National Association of Realtors, vacation home sales increased 10 percent in 2012. That trend was mirrored on Hatteras Island, where residential sales rose 8.5 percent over the previous year. Homes purchased for vacation and investment purposes accounted for 35 percent of all residential sales in the country. These statistics indicate that there is growing demand for homes other than primary residences.

It is no secret that real estate is a cyclical business.  There are times when market forces favor the sellers of properties and other times when circumstances favor buyers. Since the summer of 2005, we have experienced a buyer’s market on the island.  This has created an environment that makes it an opportune time for those who are thinking about buying a cottage or lot to turn their thoughts into action.

While it is highly unlikely that anyone can time their purchase to match the exact bottom of the market, it seems reasonable to conclude that we are in the bottom range of the Hatteras Island real estate market cycle. The market for residential properties peaked in 2005. Lot sales reached their high point a year later. For the past four years, the average selling price of properties has been relatively flat, setting the stage for the next upward movement.

The supply of properties presently exceeds buyer demand on the island. During May, there were 298 residential properties for sale, while 200 were reported sold during the previous 12 months. This equates to a 1.5 year inventory of unsold homes and condominiums. The corresponding number for undeveloped lots is a 1.7 year supply. The implication for buyers is that there is a good selection of homes and lots from which to choose.

Interest rates on residential mortgage loans remain near their historical low point. The interest rate on a conventional loan ($417,000 or less) is currently in the 3.75 percent range with the payment of one point (1 percent of the loan amount). From a long-term perspective, this represents a very low cost of borrowing.

The combination of eye-catching prices and low interest rates makes the affordability of properties very attractive.  For example, the monthly principal and interest payment on a $340,000 home today would be about $500 less than the payment was in 2002 for the same priced property. Alternatively, today’s rates would allow a buyer to purchase a higher priced home for the same monthly outlay. This situation presents a strong incentive to purchase before interest rates once again begin to rise.

Rental income can help offset some of the expenses of ownership. There is a vibrant market for vacation rentals on the island, and our real estate companies can help maximize the rental income for homeowners who choose to place their cottages in a property management program.

Island Realtors offer a wide range of services and expertise to help buyers find the right property, determine what comparable properties are selling for, assist with paperwork and negotiations, and suggest lenders to arrange financing.

As you consider the factors that make this such a good time to be buying a place at the beach, never forget those things that make Hatteras Island so special and that keep a firm grip on our thoughts, regardless of how far away we may travel.  Whether it is the windswept sand dunes, the crashing surf, or the unspoiled beauty of an island where 62 percent of the land is held in public trust, there is something that captures our imaginations and causes all of us to want to make Hatteras Island a more permanent part of our lives.

When all is said and done, I think each of us in our own way would echo the sentiment expressed in the refrain of a locally written song – “My Heart Will Always Be in Carolina.”  Give it some thought.  This may be the time you have been waiting for – the time to turn your dream of owning a Hatteras Island cottage or lot into reality!

(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 2013 Tom & Louise Hranicka.  All rights reserved.

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