March 10, 2014

Hatteras Island Real Estate:
A profile of buyer preferences


Real estate market statistics can be analyzed in many different ways and for many different purposes. For this article, I used market data to develop a profile of buyer preferences based on last year’s sales results. My thought was that the best way to identify those preferences was to see how buyers voted with their purchasing dollars.

During 2013, the total dollar value of real estate sales on Hatteras Island was $67,291,836 generated through 256 individual sales. Residential sales accounted for 89.7 percent of the sales volume and 73.0 percent of the sales. Unimproved lots accounted for 9.4 percent of the value of sales and 26.2 percent of sales. Commercial property transactions represented 0.9 percent of the dollar value and 0.8 percent of sales of sales.

These figures confirm the fact that Hatteras Island is primarily a residential real estate market. However, when we talk about the market being predominantly residential, we need to differentiate between detached single family homes and condominiums.

Single family homes represented more than 90 percent of residential sales, while condominiums accounted for six percent of the sales. Since 2005, condominium sales have represented on average about five percent of the total dollar value of residential sales and a little over nine percent of the number of sales.

Buyers traditionally purchase unimproved lots because they want to construct a custom-designed home that meets their personal specifications, or they buy land for investment purposes. At the same time, many buyers are hesitant to purchase a lot and build a new home because the construction will be taking place at quite a distance from their primary residence, and they are concerned about their ability to effectively monitor the progress of the project.

Historically, there has been a very limited market for commercial properties on the island. Last year, there were only two commercial sales with a dollar value of just $625,000.

Since detached single family homes play such a pivotal role in the Hatteras Island real estate market, let’s delve deeper into buyer preferences associated with this market segment.

In today’s market, location, condition, and price are the main focal points of buyers’ decision-making criteria.  From the standpoint of location, oceanside purchases accounted for almost 60 percent of the sales transactions while soundside sales represented just over 40 percent of the total. Quite honestly, I was somewhat surprised that the results were not weighted more heavily in favor of the oceanside. Looking back, there were some exceptional purchasing opportunities for soundside homes and lots.

Which of the island’s villages do you think attracted the most buyer interest? This market indicator is a little more difficult to interpret because of the variation in the number of real estate parcels in each village. Statistically, Avon, Hatteras village, Salvo, and Frisco reported the highest number of sales in 2013, followed by Rodanthe, Waves, and Buxton.

When evaluating buyers’ perceptions of location, qualitative considerations often play an important role. For example, the three northern villages are much closer to the restaurants and attractions north of Oregon Inlet, and they involve a little less driving time from buyers’ homes. In addition, you might be surprised by how many buyers say they prefer Avon because it is where the Food Lion is located, and, of course, Hatteras village is the home of our charter fishing boat fleet. When all is said and done, for whatever reason, visitors usually end up preferring one village as their favorite and end up buying the home of their dreams in those locations.

Another factor in buyer preferences relative to location is water frontage. There is a saying in real estate that “nothing adds value like water frontage.”  That axiom seems to hold true in the eyes of buyers on Hatteras Island. Last year, waterfront properties accounted for over 35 percent of all sales on the island.

Oceanfront properties were in highest demand among waterfront locations followed by canalfront, soundfront, lakefront, pondfront, and creekfront.  This distribution seems to make sense since oceanfront properties with their proximity to the beach are generally considered to be a preferred setting when the purchase price fits into a buyer’s budget. Canalfront properties have become especially attractive because of their affordable prices and their ease of access to the Pamlico Sound for boat owners.

In terms of the number of bedrooms that buyers favor, nearly 75 percent of all single family sales featured three, four, or five bedrooms with three-bedroom homes being the largest component accounting for almost 40 percent of sales. I expected that four- or five-bedroom cottages might come out on top. Actually, when taken together, four- and five-bedroom homes characterized a little over 35 percent of single family sales – almost the same percentage as three-bedroom cottages. The largest homes with six, seven, and eight bedrooms represented 20 percent of the market.

The heated living area or square footage of homes is often mentioned by buyers when they are discussing their ideal home with their agent. Last year, homes with less than 1,500 square feet of living area were associated with about 25 percent of single family sales. Those that were 2,000 to 3,000 square feet in size represented just about the same percentage. Cottages featuring 1,500 to 2,000 sq. ft. accounted for just over 20 percent of sales. Homes with 3,000 to 4,000 square feet were seen in around 15 percent of sales. The largest homes with over 4,000 square feet of living area were the least favored among buyers with fewer than 10 percent of the market. 

What about the age of the homes sold in 2013? Intuitively, we might anticipate that newer properties would be more appealing to buyers than older cottages. This was, in fact, the case. During 2013, homes built since 2000 were reported in over 40 percent of sales. At the same time, cottages built before 1979, those constructed in the 1980s, and those built between 1990 and 1999 each represented about 20 percent of total single family sales – an interesting mix to say the least.

Perhaps the most important underlying factor influencing many of these statistics was the selling prices of the properties. To correlate all of the variables would require quite an extensive research project. However, we can gain some valuable insights into buyer preferences by examining the sales by price range.

Eighty-five percent of single family residential sales last year had selling prices under $500,000 with homes in the $200,000 to $300,000 price range being the most popular. Overall, two thirds of single family purchases were in the $100,000 to $400,000 price range.  The lowest priced sale was $40,000 for a two-bedroom cottage, and the highest priced transaction was $900,000 for an eight-bedroom oceanfront home with six baths.  There were no million dollar sales on the island for the second year in a row.

Finally, no survey of buyer preferences would be complete without noting the financial attraction of foreclosed and short-sale properties. While the importance of distressed properties is on the wane both nationally and on Hatteras Island, these homes and lots still play a significant role in the island’s real estate results.

During 2013, short sales and foreclosures made up nearly a third of residential sales and 40 percent of land sales. It may be interesting to note that there was about an equal number of residential bank-owned sales and short-sales, but there were more foreclosed lot sales than short-sales. All things considered, distressed properties were responsible for about 35 percent of all real estate sales on the island last year.

When I was planning this article, I initially thought that buyer preferences might be so clear-cut among all of the component categories and that a composite profile of the typical Hatteras Island buyer would magically appear at the end of the analysis. In reality, some preferences ended up being statistically well-defined while others were more divergent.

Some of the observations concerning buyer behavior that were characterized by a high degree of clarity were these: 

  • Residential sales dominated the Hatteras Island real estate market.
  • Single family detached home sales overwhelmingly exceeded condominium purchases.
  • Three-bedroom cottage sales were preferred by a ratio of at least 2 to 1 over other bedroom options as were homes constructed since 2000.
  • Oceanside property sales surpassed purchases in soundside locations, and Avon, Hatteras, Salvo, and Frisco were the villages recording the most sales.
  • The size of homes as measured by square footage displayed much less consistency. Also, except for noting that the most residential purchases were in the $200,000 to $300,000 price range and that only 15 percent of sales had selling prices above $500,000, it was difficult to identify a distinct buying pattern relative to purchase prices.

Finally, some market indicators seemed to stand off by themselves. Examples included data showing that 35 percent of purchases were in waterfront locations and that a similar percentage of sales were attached to foreclosures and short sales.

My sense is that each of us has some preconceived ideas about buyer preferences in the Hatteras Island real estate market. How did the information presented in this article match up against your anticipated buyer profile?

(Note: To determine the dominant buyer preference for each of the property characteristics that were studied, the feature with the highest number of sales during 2013 was selected as the preferred choice among buyers.)

(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 2014 Tom & Louise Hranicka.  All rights reserved.

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