March 6, 2015

Hatteras Island Real Estate: 2015 Market Overview

By TOM HRANICKA 

Toward the beginning of each year, I find it helpful to sit back and try to develop a broad overview of the real estate market on Hatteras Island – where it has been, where it is now, and what the future might hold.

Looking back on the island’s real estate market over the past 10 years, we can observe that a buyer’s market for residential properties began in the summer of 2005. Over the next four years, the average selling price of homes plummeted about 41 percent. Then, since 2009, selling prices have been essentially flat. Last year, the average residential selling price was $322,236 – down 45 percent since the peak in 2005. The following chart, graphically displays this pattern of price performance.



The market for undeveloped lots followed a similar pattern, peaking in 2006, a year after residential properties. Average lot selling prices then dropped 69 percent over the following three years, and they have remained basically flat since then. In 2014, the average selling price of lots was down about 74 percent from their high point. This chart shows the trends that we have seen in undeveloped lot prices during the present real estate cycle.

              


With these observations as background, where does the real estate market on the island stand today? This table depicts the major market indicators at the end of 2014 in comparison with year-end 2013.

HATTERAS ISLAND REAL ESTATE MARKET INDICATORS
2014 VS. 2013



As you can see, 2014 was another flat year for the island’s real estate market. From a broad viewpoint, that might be a fairly positive outcome given that the island experienced significant access issues after Hurricane Irene in 2011, Super-storm Sandy in 2012, the closing of the Bonner Bridge for several days in December 2013, and Hurricane Arthur this past July.

The theme of the current residential market is more sales at lower prices. The increase in the number of sales resulted in an increase for the year in the total dollar value of home sales. The market for undeveloped lots remained in the doldrums with almost all major indicators recording a decline. The rise in the average sale price is probably attributable in part to several large sales which pushed the final value up. If these sales were removed, the average selling price would actually show a decrease for the year.

I think that it is important to note that while distressed properties (foreclosures and short sales) have heavily influenced selling price statistics in past years, this segment of the market is noticeably declining.

In my opinion, the most positive interpretation of the current statistics is that the market continues to stabilize and to become positioned for the next upward cycle.

This brings us to a discussion of the future and where the market might be headed. There are a variety of influences that we need to consider.

Observers of the Hatteras Island real estate market have commented that the island follows approximately a 10-year cycle. If true, 2015 will be the tenth year of the current cycle. Some of those same individuals have expressed the opinion that when the market does recover, it will exhibit a more traditional growth rate in the five to six percent range rather than the double digit appreciation that we saw before the market started its most recent downturn. This leads me to believe that 2015 will be a transitional year between the end of the buyer’s market that we have been experiencing and the start of a new seller’s market.

Unquestionably, the uncertainties surrounding access to the island via Highway 12 have influenced and are influencing buyers’ decisions concerning the purchase of properties on the island. Buyers are looking for assurance that they will be able to get to their vacation homes without delay and once here, that they will be able to get off the island with minimal, if any, inconvenience. Long-term, permanent solutions for the replacement of the Bonner Bridge over Oregon Inlet and resolution of the hot spots where the road closes from time to time are essential to the future health of the island’s real estate market in particular and the prosperity of the island’s business community in general.

Another factor that is having an impact on the real estate market is the issue of beach access and off-road vehicle restrictions on beach driving. While the effect of this constellation of topics is hard to quantify, it is definitely an area of concern for an important segment of visitors to the island and to homeowners.

Finally, we need take into consideration the natural forces that affect Hatteras Island. The periodic strong storms and hurricanes that we experience together with their after-effects are a well known aspect of life on the island that will continue to affect us in the future. I also believe that erosion-related issues on the island have become more prominent during the current real estate cycle and may have an impact on selling prices in some locations.

After studying how the real estate market has performed over the last decade, it would be easy to form a negative opinion of future prospects for sales and prices. My sense is that nothing could be further from the truth and that, in fact, we may be experiencing a classic opportunity to buy property at the low point in the real estate cycle, setting the stage for making a profit when the property is sold.

As each of us evaluates the past, present, and future of the real estate market through our own unique set of filters, let us always keep in mind the unique and very special place that is Hatteras Island. With over 60 percent of the island held in public trust and protected from development and with seemingly endless miles of deserted beaches and windswept sand dunes, there is no other place like this barrier island that we call home, whether it is for a few days each year or for a lifetime.  This is the heart of the value proposition that will always attract people to our shores and that will, in turn, assure the viabilty of our real estate market in the future.


(Tom Hranicka is a broker with Outer Beaches Realty. Questions and comments may be sent to him at P.O. Box 280, Avon, NC 27915 or by e-mail to hranicka@hatterasisland.com. Copyright 2015 Tom & Louise Hranicka.  All rights reserved.)


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