January 30, 2014

Hatteras Island Real Estate:  Questions owners are asking

By TOM HRANICKA



Last Friday, Irene Nolan, editor of the Island Free Press (www.islandfreepress.org), Hatteras Island’s online news website, wrote a blog titled “Islands Under Siege.” In it, she cataloged many of the issues currently facing Hatteras and Ocracoke islands, and she commented on the economic impact that these challenges are creating.  In this article, I would like to expand on this theme as it relates to the real estate market on Hatteras Island.

Over the past two months, I have received a number of calls from homeowners, who are all asking essentially the same questions – what is the current real estate market environment like and where do you think the market is headed?

These were my responses.

Based on the year-end statistics, 2013 will be the fifth year of flat real estate prices on Hatteras Island. In reality, selling prices have dropped slightly. The following chart shows the history of average residential selling prices on the island since 2005, the year the buyer’s market began for us. Median sale prices are following a similar pattern.

              

What is keeping prices from increasing?

In my opinion, the principle reason is buyer uncertainty over access to the island via the Oregon Inlet Bridge and Highway 12 on Pea Island.

It is a generally accepted axiom that markets don’t like uncertainty.

In 2011, the island was impacted by Hurricane Irene which left Highway 12 closed for over a month. In 2012, Super-storm Sandy again closed Highway 12 for a period of time, followed by limited access across a sand road that was passable only by vehicles with four-wheel drive. Then, last December, the Bonner Bridge was closed for ten days because of the loss of sand around the base of one set of pilings. During these periods of closure or limited access, residents and visitors had to use ferry service between Rodanthe and Stumpy Point to get to and from the island.  

Prior to the bridge closure last December, some buyers were starting to consider other areas north of Oregon Inlet as alternatives to Hatteras Island for their purchases. Their thought process was that they really wanted a cottage on Hatteras Island.  However, if they were going to buy, they wanted to be confident that they could get to their property, and once they got to their cottage, they wanted to be assured that they could get off the island by road versus the ferries.

The recent closing of the bridge prompted a more immediate and strident response. I heard reports that a few buyers who had contracts to purchase properties decided to cancel those transactions.

A secondary factor that has affected the real estate market has been the National Park Service closures of prime fishing areas of the beach and the increasing restrictions on the usage of the beach in general. Another issue that is starting to emerge is the changes that are proposed for the National Flood Insurance Program.

What is it going to take to turn this pattern of flat real estate prices around?

I firmly believe that buyers are anxiously awaiting some sign that progress is being made on stabilizing access to the island. Every time construction on the new bridge is ready to start, extremist environmental groups obtain another injunction to stop the work.

Last summer, beach nourishment was supposed to take place in the high erosion area around the S-curves north of Mirlo Beach. To date, no action has taken place although once again, the authorities are saying that beach nourishment will begin shortly. The bottom line is that there has been only limited visible progress on any of these projects.

This leaves us with the question of where the real estate market is headed.

In the long run, I have no doubt whatsoever that real estate prices will recover, albeit at a moderate pace. However, in the short run, I foresee another flat year in 2014 for the real estate market unless buyers can see some progress, no matter how small, on the various Highway 12 improvement projects.

A potentially positive factor working in the background is that observers of the Hatteras Island real estate market say that the island’s market runs in approximately 10-year cycles. If there is any validity to this pattern, then 2013 marked the eighth year in the cycle.

Conversations usually end with the owners requesting probable sale price analyses of their properties whether or not they plan to list their cottages for sale. As a part of their services, our Hatteras Island real estate brokers regularly provide owners with complimentary evaluations of the probable sale prices of their homes or unimproved lots.

One thing is absolutely certain - there is no place like Hatteras Island, and if we can persevere through the current uncertainties, I am confident that real estate values will once again reflect the unique values presented by the island’s homes and lots.

The other certainty is that current price levels present an extremely attractive purchasing opportunity for those who have dreamed of having a cottage at the beach. Any time that you can purchase property for 45 cents on the dollar relative to peak prices, it is a situation worth your careful consideration.

(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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