September 5, 2017

Hatteras Island Real Estate: 
The Hatteras Island Real Estate Market: 2007 - 2017


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.

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 took hold. 

The following chart shows the history of average residential selling prices on the island that has occurred since the buyer’s market began in 2005.


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.

The 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 dreams.

For 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,, 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 a ferry.”

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 replaced.

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 opportunity.
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!

(Tom 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.)
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