Market Indicators

The Outer Banks real estate market is unique. Unlike what happens with sales in many other areas, the majority of Outer Banks residential sales are for vacation and retirement homes, and this fact changes the nature of the market. Vacation homeowners typically do not have to sell, and vacation home buyers purchase for enjoyment rather than shelter. These unique market aspects should be well understood before making intelligent buying or selling decisions here. To better serve our readers, the staff at Real Estate Outer Banks decided to provide you
with a few of the most valuable market indicators for these residential sales. Knowledge is power and these indicators combined with the knowledge and experience of your Realtor will help you make the best buying or selling decision for your particular circumstances.

This article will describe these three key sales indicators and how they relate to today’s market. The indicators are absorption rate, average days on the market and the median sales price. They will be obtained on a monthly basis from the Outer Banks Association of Realtors’ Multiple Listing Service database and compiled by F. Jeffrey Scott. The vast majority of real estate transactions on the Outer Banks come from this database. Each indicator is based on the last six months’ sales activity. Using the sales information from this timeframe allows trends to become evident while tempering very high or very low individual months. Sales activity, including the number of active listings, will be retrieved on or about the 15th of each month. By that date in each month, all sales for the previous month should be entered by all Realtor members. Because the absorption rate number is dependent on the number of listings in each market segment and the number of listings changes constantly, this absorption rate may vary slightly depending on when the active listing count was taken. These indicators focus only on residential sales of improved property. A local Realtor can provide you with land and commercial sales statistics.

Absorption Rate:
This indicator quantifies current supply and demand. It is the number of months it would take to sell the entire listing inventory at the current rate of sales. For example, if there are five residences currently on the market and one residence is being sold each month, then it will take five months for all the inventory to be absorbed. When the absorption rate goes down, it means that there are more buyers and fewer sellers and is called a seller’s market. When the absorption rate goes up, there are more sellers than buyers and the market favors the buyer. Most experts believe that an absorption rate of six months is a neutral rate that favors neither buyers nor sellers. Here on the Outer Banks where a much larger portion of all sales are vacation rental or second homes, the neutral absorption rate is closer to a year. In this current buyer’s market, absorption rates vary from 15 months to 41 months depending on the location. However, the current trend in almost all areas is towards an even or slightly lower absorption rate.

Average Days on the Market (DOM)
This indicator shows the average time period it takes for the total number of sold properties to go under contact. It is calculated by adding up the total number of days between when sold properties were listed and when they closed and then dividing that number by the total number of properties. There are a few factors that may cause this number to be lower than the true number. Sometimes a property is taken off the market and is listed by another company. The DOM for this new listing will go back to zero even though the property was for sale before. Also, this number only counts those properties that have actually sold. During every period, some homes are taken off the market without selling. Even though this number may be slightly lower than the actual number, it will paint an accurate picture of the DOM trend in each area. Average DOM information is also helpful in determining the value of specific properties. Since the spring of 2003 almost all information on properties listed in the Outer Banks MLS has been kept in an electronic history file. This information is easy for Realtors to access. Comparing the price changes and other activity of a specific property to the average DOM will give buyers and sellers a better feel for fair market value. Most areas today are seeing average DOM numbers close to 200 days.

Median Sales Price
This number is the actual sales price of a property in the middle of all the sales during that time period. For example, if seven properties sell and they are put in order of highest to lowest price, the sales price of the property in the forth place would be the median sales price because there were three sales lower and three sales higher. This indicator shows changes in property values over the long term, and in the short term it shows the price range where the majority of sales are occurring. Median sales prices have come down over the last year as jumbo loans (those loans more than $417,000) have become increasingly expensive. Buyers today are buying more of the lower-priced properties where they do not need a jumbo loan. This has caused the median sales price to decrease. Median prices vary greatly from each area of the Outer Banks. Duck and Corolla currently have the highest median sales prices over $500,000, and Kill Devil Hills has the lowest median sales prices at close to half that number. Even when using six months’ worth of sales activity, median sales prices can sometimes vary significantly between reporting periods. It is a good idea to look at a few months at a time to get a better feel for the current trends.It is our goal that this information helps you better understand the local real estate market. As this section of the magazine develops, please feel free to make suggestions about the type of statistical information you would like to see. Simply email dearjeff@oneboatguides.com or the editor at beth@oneboatguides.com.