June 2, 2015

Hatteras Island Real Estate:  Frequently Asked Questions


As summer approaches and the island becomes more active, I like to publish an updated version of an article that addresses some of the most frequently asked questions that I hear from prospective buyers and sellers. Many of the issues remain unchanged, but occasionally a new question will make its way into the list.  As an example, prospective buyers have been inquiring more frequently about plans to stabilize Highway 12 on the northern end of the island. 

According to Park Service reports, about 2 million people visit the Cape Hatteras National Seashore each year. Quite a few choose to spend some of their well-deserved vacation time talking with our local Realtors about property in Hatteras Island’s seven villages. While each person’s specific needs and interests are different, a number of surprisingly similar questions arise during these conversations. Some of the most commonly asked questions and their answers are presented below.

Question: We are just starting to consider buying property. Do you have any recommendations for a game plan?

Answer: Hatteras Island is a very special place, and each of its villages has its own unique charm. My advice is to visit each of the villages, drive around, and let your feelings be your guide. Usually, one or two areas will appeal to you more than the others. Once you find the location that feels right for you, then start to clarify price ranges that meet your criteria and zero-in on the “perfect” property.

Q: What does real estate cost on Hatteras Island?

A: There are properties to meet just about every need and every budget. Be aware that prices may vary among the villages.

  • Oceanfront homes are priced from $299,900 to $2.4 million. Lower priced homes usually have erosion concerns.
  • Current asking prices for oceanfront lots begin around $224,000 and peak at $595,000.
  • Oceanside and soundside lots start around $29,000, and cottages range from $105,000 to about $1.5 million.
  • Soundfront homes cost $279,000 to $995,000.
  • Soundfront lots are available for $35,000 to $2.2 million for a 15-acre undeveloped parcel in Salvo.
  • Canalfront homes reflect asking prices from $169,000 to $598,000.
  • Depending upon location, size, and age, condominiums range in price from $99,900 to $300,000.

When annual rental income is taken into account, the cost of owning a cottage on Hatteras Island can be surprisingly affordable.

Q: How has the Hatteras Island real estate market performed in the past?

A:  Over the long term, the real estate market on Hatteras Island has rewarded property owners with attractive returns on their investments. As the real estate market has weakened, the average selling prices of houses and undeveloped lots have declined. I am reasonably confident that at this time we are within the bottom range of the market cycle and that the stage is being set for the market’s next movement upward.

Q:  Is it better to buy an existing cottage or to purchase a lot and build?

A:  There is no one answer to this question that is right for everyone.  Some feel more comfortable with the construction process than others.  My general advice is that if you find an existing home that you really like, go ahead and purchase it.  If none of the homes you see is truly what you want, then buy a lot and build a home that reflects your personal tastes. 

Q:  If I should decide to build a new home, what can I expect it to cost?

A:  Construction prices for new homes are currently about $130/square foot.  A complex design and upgraded features can raise the cost of construction even higher. The cost of the lot, furniture, and any amenities would be added to reach the total price.  We have well-qualified builders, and the North Carolina building code for coastal properties is considered to be quite strict.

Q:  How difficult is it to obtain financing for real estate purchases on Hatteras Island?

A:  For qualified buyers, financing is available through a variety of lenders.  In late May, 30-year fixed-rate mortgages carried interest rates as low 3.875 percent with the payment of one point or less. 

You should be aware that, while recently showing some signs of easing, underwriting standards have increased across the spectrum of loans. Funding for mortgages is readily available, but buyers still have to meet qualification requirements that are more stringent than they were in the past. An important improvement in the lending environment is that loan amounts in excess of $417,000 are becoming easier to obtain.

Q:  What role are foreclosures and short sales playing in the Hatteras Island real estate market?

A:  The number of foreclosure sales and short sales certainly bears watching both for its influence on our local market, as well as being a measure of the effectiveness (or ineffectiveness) of governmental and private efforts to stem the tide of families' losing their properties.  Fortunately, the numbers of new foreclosure filings on the island have significantly declined since the peak in 2009. During the past year, foreclosures represented about 12 percent of residential sales, and short sales (situations where the mortgage balance is more than the value of the property) accounted for 8.5 percent of sales. In total, about 20 percent of all residential sales were distressed properties.

While comparatively small in terms of absolute numbers, the presence of foreclosures and short sales in the market, combined with an excess of supply in relation to buyer demand, have contributed to a decline in selling prices. Purchasing foreclosed properties and short sales can be more challenging that a traditional purchase, so be sure to seek the assistance of a real estate agent who is familiar with these types of transactions to guide you through the process. 

Q: How does it work if we want to rent our cottage when we are not using it ourselves?

A: There are professional real estate firms on Hatteras Island which for a fee will provide a comprehensive property management program. Services include advertising your cottage, scheduling rentals, cleaning, maintenance, and all necessary accounting. Once you make the decision to rent, they will take care of just about everything else.

Oceanfront houses generally rent for 25 to 28 weeks per year with some select homes exceeding the 28-week performance. Soundfront properties will rent a few weeks less. Oceanside and soundside cottages usually experience somewhat fewer rental weeks depending on their distance from the water and the amenities that are offered. Prime waterfront properties have the highest occupancy rates and generate the greatest rental incomes.

Q: What happens to the furnishings when a home is sold?

A: In the majority of sales, the buyer and seller negotiate a price for the furnishings, and the furnishings stay with the property.  Lenders can lend only on the land and the structure.  The furnishings are considered to be personal property and are sold by a separate Bill of Sale in conjunction with the transaction. The seller may choose to identify certain items that are excluded from the Bill of Sale, such as the contents of owner storage closets and items of personal or sentimental significance.

Q: How difficult is it to get flood insurance on Hatteras Island?

A: There should be little, if any, problem getting flood insurance coverage for most properties on Hatteras Island. In fact, there are some locations in which flood insurance may not be required. Flood insurance is available through both the National Flood Insurance Program (NFIP) and private insurance companies.

You should also be aware that there are some areas on the island where flood insurance offered through the National Flood Insurance Program is not available. This is an important fact to know when purchasing a home, since the cost of private flood insurance can be substantially higher than the cost of an NFIP policy.

Significant changes are taking place in the National Flood Insurance Program. Buyers and sellers are advised to consult with a professional insurance agent to understand the impact of these changes on a specific property.

Q: What is the current situation concerning the availability of water and sewage services on Hatteras Island?

A: The Dare County Water System provides central water service to all villages on the island, although private wells are still in use in some locations. A new central water system for Rodanthe, Waves and Salvo was completed in 1996, and a reverse osmosis plant in Frisco provides water service to the southern villages.

Private septic systems are the standard method for waste disposal on Hatteras Island, although at least one community has a central sewage treatment facility.

Q: What are the current plans for stabilizing Highway 12 access to the island?

A: There are three main projects to improve Highway 12 between Oregon Inlet and the northernmost village of Rodanthe.

  1. A new bridge over Oregon Inlet parallel to the existing Bonner Bridge.
  2. A new bridge to replace the temporary bridge over the Pea Island Inlet.
  3. Either an elevated roadway that will extend from an area north of the S-Curves into Rodanthe or a road from Highway 12 to the Pamlico Sound connecting to a bridge in the sound that would bypass the S-Curves. As an interim measure, the beach in the vicinity of the S-Curves was nourished last August to stabilize that area while a final decision is being made on which option will be implemented.

Currently, these projects are on hold while the North Carolina Department of Transportation and the Southern Environmental Law Center are engaged in confidential negotiations designed to work out solutions for the stabilization of Highway 12. Everyone is anxiously awaiting the outcome of these negotiations, and many believe that once progress can be seen on the Highway 12 projects, the real estate market will start to rebound.

Q: How many year-round residents are there on Hatteras Island?

A: The 2010 census results indicated that the population of Hatteras Island is 4,322, compared to 4,001 in 2000. In 1990 the census reported 3,814 island residents. The populations by village were reported as: Rodanthe, Waves, and Salvo 624; Avon 777; Buxton 1,526; Frisco 891; Hatteras 504.

Q: It is my impression that Hatteras Island experiences severe weather. What can you tell me about weather conditions?

A: While it is true that Hatteras Island from time to time does experience severe weather, if you think about it, so does just about every place else in the country! The perception that we get more than our fair share may, in part, be the result of the prominence of Cape Hatteras as a geographic landmark and the fact that it is frequently used as a reference point by weather forecasters. Statistically, the experts say that on average the Outer Banks will experience weather that has the potential to cause damage about three times a year. A study by the National Oceanic and Atmospheric Administration estimated that, based on historical records, a major storm strikes the island about every 11 years.

The weather on the island is normally quite pleasant. We get generous amounts of rainfall.  The wind averages about 11 mph, and the average temperature is a comfortable 69 degrees. Believe it or not, according to National Weather Service records, the official temperature on Hatteras Island has never reached 100 degrees! The highest temperature ever recorded was 97. Constantly changing weather patterns are a part of life on Hatteras Island.

From my perspective, the number of warm, sunny days and star-filled nights far outweigh the concerns created by the strong storms that have been a fascinating part of the island’s history.

Q: Is now a good time to buy?

A:  After experiencing double-digit rates of appreciation for several years, the average selling prices of properties declined substantially. Prices on Hatteras Island offer a very strong value relative to other resort areas along the east coast.

This is an excellent time to be a buyer on Hatteras Island. Both interest rates and prices are low – a combination that does not often exist. Although projected to increase, interest rates remain near historically low levels, and the average selling price of residential properties has declined about 45 percent since 2005, making homes more affordable. A fairly large supply of cottages for sale means that a good selection of properties is available for buyers’ consideration.

Opportunities in the market for unimproved lots are even more compelling. Since peaking in 2006, the average selling price of lots has declined almost 75 percent.

All things considered, there are encouraging signs that our local market is on the road to recovery.

Now that you have the answers to the most frequently asked questions about island real estate, take the next step and start investigating how current opportunities may fit into your personal plans to purchase a home or undeveloped lot. When all is said and done, there is no place like Hatteras Island!

(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 [email protected]. Copyright 2015 Tom & Louise Hranicka.  All rights reserved.)

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