Perspectives from Hatteras and Ocracoke

Buyers’ Market vs. Sellers’ Market:
What’s the Difference and Who Benefits?

By Molly Harrison

“There’s an awful lot on the market now. Use that to your benefit to get the best house for your needs. There are some excellent homes out there and some very good deals.”

It’s no secret that the Outer Banks real estate market has changed dramatically over the last year. A little more than a year ago, sellers were in control. They could name their prices and get them — fast. Today, however, the tables are turned, and it’s the buyers who have the power to name the prices that they are willing to pay. This is why everywhere you go on the Outer Banks — everywhere from real estate offices to Internet blogs to bars to dinner parties — everyone is referring to the current Outer Banks real estate scene as a “Buyers’ Market.”

So just what is a Buyers’ Market, as opposed to a Sellers’ Market? What are the pros and cons of these markets, and, based on this knowledge, how should you react if you’re planning to buy or sell property on the Outer Banks?

Simply put, during periods known as a Sellers’ Market, homes sell quickly and sellers have a lot of power over the price they set. Therefore, real estate prices rise very rapidly. This is known as a “hot market.” During the last decade, we saw this on the Outer Banks to a great degree: skyrocketing prices, properties selling in just a few hours after they were listed, multiple offers on one property, bids sometimes higher than the asking price, investors making big money, numerous for-sale-by-owner signs. Buyers had to be the ones on their toes, working hard to find a house before it sold, getting pre-approved for financing, being willing to settle without a lot of contingencies in the contract, or taking properties “as is.”

During a Buyers’ Markets, homes and properties sit around for a while before they sell, creating an abundance of supply. Prices start to go down because sellers no longer have as much power over the selling price, and those who need to sell will drop their prices to do it. Buyers in this market are not under pressure; they can take their time to find a good deal and usually name the contingencies they want. The signs of this type of market abound on the Outer Banks today: houses lingering on the market for months, falling real estate prices, fewer homes for sale by owner and sellers offering incentives.

It’s a simple case of supply and demand. RealEstateABC.com puts it like this: “In real estate, the relationship between supply and demand is calculated as ‘available inventory.’ Longer inventory times are associated with Buyers’ Markets. Shorter inventory periods are associated with Sellers’ Markets.”

Outer Beaches Realty’s website is a wealth of information about Hatteras Island’s real estate market. The website says that currently on Hatteras Island, “the inventory of property for sale is about 60 percent higher than it was a year ago, and both the number of sales and the volume of sales are down approximately 50 percent.” It goes on to say that “the Hatteras Island Pending Home Sales Index, a leading indicator of sales 45 to 60 days in the future, has remained essentially flat since last November, suggesting that current market conditions will continue for the next few months.”

Ocracoke Island is somewhat of an exception to the true Buyers’ Market shift.

“Ocracoke is about half and half,” says Darlene Styron-Doshier of Sun Realty on Ocracoke Island. “It’s starting to lean toward the Buyers’ Market but it’s not totally all the way there yet.”

Everyone has an opinion as to why the Outer Banks market has changed. “Rentals are not totally covering the mortgages anymore,” says Guy Newell of Hatteras Realty. “Buyers are cautious. Everybody is in a ‘wait-and-see’ mode.”

Other reasons that have been cited include investor withdrawal from the real estate market, rising interest rates, unsustainable price appreciation, and a soft rental market.

Everyone agrees that the leveling off is completely normal, part of the cyclical nature of real estate economics.

“This is just the normal real estate cycle,” says Leslie Painter, a Realtor with Colony Realty on Hatteras Island. “I think that in the next six months or so, we’ll start to see the market move again.”

The shift from Sellers’ to Buyers’ market is not just a local phenomenon; it’s happening all over the country.

“Buyers often tell me, ‘As soon as I sell my property elsewhere, I want to invest on Hatteras Island,’” says Newell. “But sales in other areas are slowing down as well. So what’s happening in the rest of the nation affects us here.”

Real estate professionals on Hatteras and Ocracoke islands are not worried about the market. Those who are in the business for the long haul recognize the natural market cycle and have a positive outlook. Hatteras Island and Ocracoke markets are mainly second-home markets, and nationally 40 percent of all residential transactions are second homes.

“This is such a unique area, and more people are fi nding out about it,” says Newell. “People are always going to want to be here.”

What should buyers, sellers and investors do in a Buyers’ Market? Here is the advice of some real estate professionals.

Advice for Sellers in a Buyers’ Market

According to the professionals, the number one piece of advice for sellers is to set a reasonable price at the onset of placing the property on the market.

“When a house goes on the market overpriced and then sits around for months, it gets to be old news and then people won’t even look at it,” says Painter. “Agents and buyers have a tendency to overlook a house that’s been on the market for a while because they think it is overpriced.”

Your best bet on setting a reasonable selling price is to consult a real estate professional who is highly experienced in the local real estate market.

Some sellers — those who can afford to wait — are withdrawing from the market for the time being and waiting for the natural cycle of the market to shift again. Those sellers who need to sell at this time will have to find ways to stand out in the flooded market. They may have to invest in home improvements or upgrades or offer additional incentives to buyers, such as help with financing.

Advice for Buyers in a “Buyers’ Market”

Real estate brokers say that, without a doubt, now is a good time to buy on the Outer Banks.

“Now is a great time to get in on that Hatteras lifestyle, defi-nitely better than it was a year ago,” says Newell. “There is a lot more inventory to choose from, so buyers can be more selective and take their time. Interest rates are very good, and prices are dropping.”

First-time homeowners and locals looking for a year-round home should definitely be keeping their eyes open for a good deal. While prices are still a little out-of-reach for most locals, the cost of local real estate is dropping.

Since buyers are not under pressure at this time, Painter suggests that buyers compare similar houses and find the best value for their dollar.

“There’s an awful lot on the market now,” Painter says. “Use that to your benefit to get the best house for your needs. There are some excellent homes out there and some very good deals.”

Newell adds that not only is it a good market but that the time of year also is right for buying, especially if you’re buying a home to put into a rental program.

Advice for Investors

As always, the advice for real estate investors is to invest for the long-term.

“People need to realize the difference between being a real estate investor and a real estate speculator,” says Painter. “An investor looks at the market 5 to 10 years from now. Speculators are looking for a quick turnaround.”

A Buyers’ Market is not a good time for speculating or “flipping,” which is buying a property and expecting to sell it quickly at a high appreciation. This practice was successful a few years ago on the Outer Banks in the height of the “hot market,” but it also got a lot of novice investors in trouble financially when the market became “soft.”