What’s Really Going On with Real Estate on the Outer Banks in 2007?

By Gian Hasbrock

You made it. You’re on the Outer Banks, one of America’s great destinations, and you’re interested in owning a bit of this place. But what’s really going on with the market here? You’ve heard rumors; you know that there are a lot of places listed for sale. Well, this article can answer some of your questions. To get a clear picture of the Outer Banks real estate market, we’ll look at the recent past, which if you don’t look hard at statistics might point to a drier market, but we’ll also get some hints from some real estate professionals who are experiencing their best year ever.

That sound you hear is not necessarily the hiss of the so-called collapsing real estate bubble. More likely it’s just the ever-present Outer Banks wind. But there are quite a few voices in your ear and they’re probably not singing harmoniously. It’s easy to be confused. But the top producers we spoke to are quite clear: Don’t let this year go by without a buy. You really don’t want to wait a few years and exclaim how you could just kick yourself for missing one of the best buyer’s markets on the Outer Banks in years.

Jack Riggle, of BD&A Realty and Construction, had a very successful 2006. What does he think 2007 holds? “If you really look deep at the numbers, you’ll see that our market started its slowdown back in July of 2005. It has already seen its bottom, troughing in July of 2006. I’ve been sensing a pickup since late 2006.” He’s looking forward to the near future where we’ll regain the momentum that drove the market in the first part of the decade. “The pot is beginning to bubble,” Jack said. He predicts a slower than usual spring but a stronger than usual summer and fall. “Now is the time to buy,” Jack said.

To get a more educated look at the Outer Banks market, let’s look at the nation, the region and then the local scene. The number of existing homes sold nationally in 2006 was 6.48 million units, down 8.4% from 2005 when there were 7.1 million units, and down 4.4% from 2004 with 6.8 million. New home sales were down 17.4% from 2005 and down 11% from 2004. Nonetheless, 2006 was the third best year ever for real estate sales, with 2005 the best and 2004 the second. (This just goes to show the strength that the near-50 year lows in interest rates we had in the first part of this decade can bring to a market.) So what’s all the fuss about in the media touting a real estate market that’s in the tank? Simply put, it was the precipitousness of the downturn in 2006 that made the headlines. We had not seen such a marked year-over-year contraction since 1979. (And do you remember 1979? Interest rates then were approaching 20% and inflation was in double digits.) The reality is that the average existing home price in 2006 was $268,300, an increase of less than 1%. New homes average prices at $304,602 were up 2.6% last year.

Dave Hoare, also of BD&A Realty and Construction, has been a top producer on the Outer Banks for years. He knows confusion doesn’t sell. “There’s no confusion now,” Dave said. “Confusion in the past resulted from real estate activity that resulted from a feeding frenzy. Rents were out of alignment with sales prices. Now the rental numbers will dictate the pricing,” he predicted. “There are really good buys out there today. But ensure that your activity reflects the real estate fundamentals,” he advised. “If you’re going to use the property yourself and you believe in the area and its future, then move forward with what time will prove to be a good investment.” Dave noted that without the mob pressure, and with lots of inventory, purchasers can make a truly wise decision. “It’s a great time to be a buyer,” he exclaimed. “Sellers are the ones in a state of confusion. If they bought recently, they have some hard choices.” Dave advises even today to not invest in real estate if you can’t hang on through slower times.

So what does the REALTOR trade organization, NAR, forecast for 2007? They are projecting existing home sales will be down 1% to 6.4 million units and new home sales down 9.4% to .957 million units. NAR is projecting that existing home prices will increase 1.9% this year and new home prices will be up 1.8%. How accurate are their forecasts? Well, um, not very. They tend to underestimate growth in good years and understate losses in bad years. But, okay. We’ll take their forecasts on the national level with a grain of sand (hey, this is the beach, we have more sand than salt). Since we’ve already experienced nearly a quarter of the year already, we can examine the data. How are we doing nationally?

Existing home sales have improved from late 2005 but still lag behind 2006 numbers. In new home sales, the first months of the year showed a continued slide. Down 20% from the same period in 2005, there’s a massive inventory still to be absorbed in the new home markets around the nation. The slide was augmented by historically high cancellation rates as investors fled the market. Where did all those investors go? Well, they went to the stock market, where equities were breaking all-time records...until March when Greenspan sneezed in Shanghai and the markets caught pneumonia. Perhaps some of those investors will be returning to the real estate arena sooner than they thought.

How do we stack up in North Carolina against these national figures? Pretty well. In January of 2007, U.S. existing home sales were down 4.3% from January of 2006, but in North Carolina, we were down by only 2%. Give credit to the Triangle and the Triad, which saw significant 6% increases compared to 2006. How did the Outer Banks stack up? Our market was down 16% in number of sales overall compared to January of 2006, but we did rather well compared to two other resort markets in the state. Brevard County in the mountains was down 52%, and Brunswick County in the southeast was down 54% (ouch!).

Dan Martier is a top producer with Coldwell Banker Seaside Realty, and last year his activity put him in the top 2% of all REALTOR® members of the Outer Banks Association of REALTORS. Dan echoes our other professionals in noting that “it’s a wonderful, amazing time to buy real estate on the Outer Banks. It’s time for the truly savvy buyers to come on.” His best advice to sellers: “Conform. If you really want to sell, you need to conform to where the market is today, and it’s still adjusting. There’s just so much competition out there, you must place yourself in a position to sell,” Dan mentioned. To be placed in that position, it’s all about your pricing. “So if you really want to sell, you’ve really got to take a hard look at your price to get noticed,” he concluded.

The bright spot on the Outer Banks statistics is found in comparing homes under contract in the first two months of 2007 compared to 2006. With 211 units contracted this year compared to 123 last, that’s an increase of 72%. Land sales remain highly depressed on that same measure: down 67% compared to 2006. Tip O’Neill once said that all politics is local, and real estate is all about the specific location. The top submarkets for homes on the Outer Banks, based on activity so far this year, are Kill Devil Hills, Nags Head, Kitty Hawk, Corolla, and Duck. Another bright spot is that median pricing in February is down only 1% from the same month in 2006. Back in July of 2006, the median price was down nearly 20% from a year earlier.

Ben Seal, who works with OBC Real Estate has been active in the Outer Banks real estate market for more than 20 years. He has seen many cycles, both boom and bust. Ben advises, “Go south [to Hatteras Island]. Visit the newest communities where there is still room for appreciation. Natural amenities are waiting to be enjoyed. Buy now, because supply of quality waterfront neighborhoods is limited,” he advised. Sellers and developers are offering great incentives to become involved. “There’s no doubt: Market conditions are in the buyer’s favor,” Ben said.

The real estate market runs in predictable cycles. Last year we concluded an expansion in real estate nationally that ran double the length of the “normal” cycle. It was a necessary correction, a breather, and here on the Outer Banks, we were blessed that we got most of our pain out of the way early. So, before you say bye to the Outer Banks, consider a buy. Our panel of professionals say that it’ll save you from that horrible comment you might make 10 years from now of…”If only we had bought back in 2007!” Don’t miss one of the best buyer’s markets ever on the Outer Banks.

Gian Hasbrock, MIRM, CRS, ePRO, is VP of Sales & Marketing for OBC Real Estate in Kitty Hawk and Salvo and heads WOWISM (Walk On Water Inspired Sales & Marketing). Reach Gian at (252) 207-9000 or gian@wowism.com