|September 5, 2017
Hatteras Island Real Estate: When
I received a call from the Island Free Press asking me to write an
article for the website’s 10th anniversary that summarized the Hatteras
Island real estate market over the past decade, I considered the
assignment to be an interesting opportunity. The market has in
many ways been challenging to say the least during this period.
The Hatteras Island Real Estate Market: 2007 - 2017
By TOM HRANICKA
In order to place the performance of the real estate market on the
island over the past 10 years in perspective, we have to recall the
national and local events and circumstances that were occurring during
this period. Between 2007 and 2009, the country faced its worst
financial crisis since the Great Depression. Named the “Great
Recession,” this unsettling time in our country’s economic history saw
significant declines in housing prices, the collapse of a major
brokerage company, and the stock market hitting bottom in March 2009.
Fortunately, financial stabilzation and fiscal stimulus actions at the
federal level prevented the economic downturn from becoming even worse.
As you think about the stress that this recession had on the finances
and the overall concerns of Americans, keep in mind that all purchases
of real estate on Hatteras Island are discretionary. No one is
transferred to Hatteras Island in connection with their employment, and
no one has to buy. Individuals and families buy homes and lots
because they love the island and want to make it a more permanent part
of their lives. When faced with financial uncertainty in their lives or
in the economy as a whole, they quite often choose to defer their
purchases of vacation properties. This mindset can linger long after
the economic crisis has passed.
It is also important to note that 2000 to 2005 were boom years during
which real estate prices on the island became inflated to unsustainable
levels. Then, around mid-2005 that changed, and a very dramatic decline
The following chart shows the history of average residential selling
prices on the island that has occurred since the buyer’s market began
The good news is that a recovery in the residential market began about
three years ago, and through August of 2017, the average sale price had
risen to $367,903.
The next graphic shows the pattern in median selling prices over the
past five years basically mirroring the average sale price data.
Through August of 2017, the median home sale price was $290,500.
case for a market recovery is further supported by increases in the
number of home sales and the total dollar value of sales.
Unfortunately, the market for undeveloped lots on the island has not
done as well as the residential market. After peaking in 2006, one year
after the residential market, the average selling prices for building
sites decreased significantly as shown in the next graph. Lot prices
have still not recovered, creating a very attractive buying opportunity
for investors and those seeking to build the beach cottage of their
the past ten years, the new residential construction business on
Hatteras Island has been quite weak. At times, new construction almost
came to a halt with some months not reporting any new single family
building permits. Repairs and renovations have sustained those
contractors who were able to weather the decline. It has been
refreshing to see new homes once again being built. During 2007, 64 new
single family detached building permits were issued. By 2010, the total
number of new permits had dropped by more than half to 28. Then, last
year, the number had improved to 48.
Another phenomenon that characterized the years from 2007 to 2017 was a
period when distressed properties dominated the real estate market. The
Outer Banks Association of Realtors database first started reporting
distressed properties (short sales and bank-owned properties) in 2009.
The influx of distressed properties was a delayed response to buyers
who bought their homes at the peak of the market, experienced a
significant decline in the value of their properties, and found that
they could not sell them at at a price close to what they originally
paid or, in some cases, for a value equal to the outstanding balances
of their mortgages. In 2011, over 55 percent of residential sales on
the island were either short sales or bank-owned homes. Fortunately,
this trend that placed a constrint on price appreciation has all but
disappeared from the real estate market on the island. Today, there are
no short sales in the current inventory of cottages for sale, and there
are only only four bank-owned properties.
The availability of financing for real estate purchases on the island
has never been a concern during the past decade. Funding for loans has
been readily available, and interest rates have been low. In 2007,
interest rates were in the 6.0 percent range for a conventional,
30-year fixed rate mortgage. Today, those same rates are in the 4.0
percent range with the payment of one point or less.
Apart from the quantitative measures of market performance, there are
other aspects of the real estate market that warrant attention.
Technological innovation has had a major impact on the way the real
estate business is being conducted both locally and nationwide. Studies
by the National Association of Realtors show that 90 percent of
prospective home buyers now start their property searches online. In
response, this explosive availability of information, especially the
quantum growth in the use of cell phones, has lead to the appearance of
Internet-based classified real estate advertising sites like Zillow,
Trulia, Realtor.com, and a wide variety of syndicated websites linked
to print advertisers like Home Tour and Homes and Land magazines. All
major real estate companies now have proprietary websites, and
successful real estate agents often have extensive personalized
websites of their own. The use of paper documents is disappearing.
Online contracts and electronic signatures are becoming the norm.
Drone technology for photographing properties for sale, which was not
even on the radar just a few years ago, is now becoming commonplace and
in widespread use.
In addition, on Hatteras Island, we have witnessed a consolidation in
the number of companies doing business on the island. During the past
ten years, some of the smaller companies have been purchased by larger
firms. Furthermore, the number of real estate agents who specialize in
the Hatteras Island market has declined slightly.
Looking more closely at the infratructure on Hatteras Island during the
last decade, for most of that time, there were very real concerns about
the stability of access to the island via Highway 12. The road was
often closed due to ocean overwash , and residents and visitors
sometimes had to contend with a lengthy ferry ride to get on and off
the island. This frustration was shown in the remarks of prospective
buyers who with increasing frequency began to comment, “We really love
Hatteras Island, but if we are going to spend a substantial amount of
money on a beach home, we want to be sure that we can get to and from
it without having to worry about the road being closed or having to use
After extensive legal battles, it was not until late in 2015 that an
agreement was reached with the Southern Environmental Law Center that
finally allowed the aging Bonner Bridge over Oregon Inlet to be
Work on the new bridge began in March 2016, and completion is scheduled
for the fall of 2018. Further south on Pea Island, Hurricane Irene in
2011 created an inlet between the ocean and the Pamlico Sound. To
address this gap in the highway, a temporary metal bridge was
constructed allowing the road to be reopened to traffic. Several years
later, in 2016 construction began on a concrete replacement for
the metal bridge. The new bridge should be completed by the end
of this year. Finally, an area just north of Rodanthe called the
S-curves has been a perpetual hot spot for ocean overwash and the
associated closure of Highway 12. A contract was awarded by the North
Carolina Department of Transportation in January 2017 for the
construction of a 2.4 mile long bridge extending into the Pamlico Sound
that will bypass the troublesome S-Curve section of Highway 12. This
bridge is expected to be started in 2018 with completion targeted for
2020. These positive, tangible developments in the stabilization of
Highway 12 have made a meaningful contribution to the recovery that is
taking place in the island’s residential real estate market.
Those who have followed the real estate market over an extended period
of time have stated that the Outer Banks real estate market seems to
follow a 10 year cycle. If we date the start of the current cycle at
2005, then the 10-year pattern appears to be valid. Since 2015, sales
have increased; average residential selling prices have risen; median
sales prices have improved; and the total dollar value of sales last
year was the highest since 2007. In the undeveloped lot market,
properties under contract were up over 45 percent during July when
compared to the first seven months of 2016. Properties under contract
are considered to be a leading indicator of future sales.
When we study the statistics and trends over the last 10 years, it
seems fairly clear that the real estate market is in the early stages
of recovery from a prolonged buyer’s market. For those with the
foresight to look at the present state of the Hatteras Island real
estate market in relation to long-term patterns, I think an objective
observer would conclude that today’s market presents a classic buying
The other thing to consider is that beyond the numbers and the charts,
the one overwhelming fact is that there is no place like Hatteras
Island. Once it captures your heart, you may return home in another
state or visit other beautiful places around the world, but you will
never really leave the island!
Hranicka is a broker with Outer Beaches Realty. Questions, comments, or
suggestions for future articles may be sent to Hranicka at P.O. Box
280, Avon, NC 27915 or emailed to [email protected]. Copyright © 2017 Tom & Louise Hranicka. All rights reserved.)