Island Real Estate: Hatteras Island home sales and trends for December 2023
Real Estate Market Update – December 2023
As we get closer to the end of the year, we have a pretty good set of statistics to compare 2023 to 2022 and see what home prices are doing on Hatteras Island.
Starting in early November, mortgage rates dropped quickly and are now hovering close to 7%. There are currently 21 residential properties under contract on the island, which is more than the total sales volume from November (17). Did that drop in rates have an impact? Two-thirds of the pending residential sales went under contract after November 9th, and here’s what happened to rates.
A couple of notes from the November Outer Banks Association of Realtors report:
Not A Lot of Sales, But Inventory Isn’t Coming Back
These stats are for the entire OBX and not just Hatteras Island, but you can see that the total number of residential sales is down substantially the last 2 years in a row. Home affordability is the lowest it’s been in a long time and that has likely caused sales volume to slow to a crawl (almost half of what it was in 2021). However, the lack of inventory is keeping upward pressure on prices – we have almost the same inventory available in November of 2023 as we did in November 2022. Market research indicates that buyers and sellers are waiting for rates to hit 5.5% before they buy or sell. Until then a lot of people are just staying put. Will rates come down in 2024? More on that in a bit…
Hatteras Island Real Estate is Down Slightly
The slowing sales volume is even more pronounced on the island so far this year. As of today’s writing, there have been 228 total sales on Hatteras Island in 2023. This is less than half of sales volume in 2021 YTD. Prices are holding steady, however, and some areas have fared better than others. Here’s a breakdown of 2023’s median YTD sale prices vs last year’s YTD sale prices –
- Tri-Villages (Rodanthe/Waves/Salvo) – up 2.22%
- Avon – down 5%
- Buxton – down 17% (only 15 total sales)
- Frisco – up 22.6%
- Hatteras Village – down 15.4% (7 sales were 1BR/1BA condos)
A Look Ahead to 2024
I have a certain set of expectations, but I will freely admit that the Federal Reserve has continued to surprise me with their rate policies (and indirectly the impact it’s had on mortgage rates). If you asked me in 2022 as they started raising rates how long that would last, I would have said there’s no way they can go beyond 4% without causing major issues. I thought they could do it for maybe a few months but then they’d have to lower them. The Fed funds rate has been over 4% for a full year now. I’ve seen people claiming the Fed will drop rates six times in 2024, and other people saying the rate needed to get up to 10% in order to control inflation. I think no matter what stance you took on mortgage rates or what your predictions were over the last year, you were probably wrong. I know I was!
But if you look at all of the fundamentals (home inventory, home prices, national homebuilders crushing it with in-house low mortgage rate promos, bond yields, inflation, etc) you can sort of see a pattern forming. So, here’s what I think will happen in 2024.
- Home prices will dip a bit between now and spring. This is normal seasonality, and while mortgage rates have come down quite a bit, they still aren’t low enough to motivate a lot of homebuyers. Once late spring and summer roll around, I think home prices catch back up to where they are now and maybe more.
- Inventory will remain static. Sellers locked in at sub-3% rates don’t have much motivation to sell, and buyers facing 7%+ rates have proven they can wait it out until things change. I think inventory will come up a little here at the beach between now and February, but quickly return to our “new normal.”
- At some point in 2024 mortgage rates will get really close to 6%. The article I linked to earlier shows that 5.5% is the “magic” rate where buyers and sellers might be motivated to jump back into buying and selling homes. If the bond to mortgage spread was closer to historical norms, rates would already be 6% today. I think we get there in 2024.
Will that cause the long line of potential homebuyers that have been building for over a year now to jump back into the housing market? If it does, you can expect home prices to start rising again because of the low inventory levels.
This is just my take on things, I certainly don’t have a crystal ball or the gift of clairvoyance. I think the data supports these three predictions but who knows what the Federal Reserve will do, or exactly when that bond-to-mortgage spread will tighten up. But despite the short-term uncertainty, I do expect mid/late 2024 to be a much better environment for homebuyers. Hang in there!
If you would like to see the entire report you can view it every month on the OBAR website:
https://www.outerbanksrealtors.com/market-data/
Thanks for reading and have a very Merry Christmas!
About the Author: Stephen Smith is an Outer Banks realtor with Real Broker, LLC. He was nationally recognized as an award-winning agent in 2021 and 2022 at his previous firm. He has lived on the Outer Banks for nearly 20 years, and met his lovely wife on Hatteras Island. They currently reside in Nags Head with their daughter, but Hatteras Island is still home in many ways. For questions on the Hatteras or greater OBX real estate market, you can contact Stephen directly at stephensmithobx@gmail.com or 252-216-9230. His website is https://www.stephensmithobx.com or you can receive his weekly newsletter by signing up at https://mailchi.mp/43cd4a4bf1a6/obxnewsletter.
