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| October 30, 2008 Hatteras Island Real Estate: Third quarter market update
By TOM HRANICKA As Hatteras Island enters the fourth year of a buyer’s market, I thought that it may be useful to review the shifts that have taken place in the major real estate market indicators. The following observations and comments reflect the changes that have occurred between the second quarter of 2005 and the third quarter of this year. Like many other places around the country, the supply of properties on the island has taken a sharp turn upward. The number of residential properties for sale has risen about 50 percent since the spring of 2005, and the supply of unimproved lots has increased 31 percent. At the same time, the number of properties that have been sold has substantially declined. Residential sales have decreased 71 percent, and the sales of unimproved lots have dropped nearly 84 percent over the three-year period. Following the well-known laws of economics, as supply (the number of properties for sale) has outstripped buyer demand (the number of properties sold), selling prices have fallen dramatically. Since the second quarter of 2005, the median selling price of homes has declined 42 percent, and the median sale price of lots has decreased nearly 40 percent. An interesting dimension to the discussion of prices is the transition that has taken place in the range of selling prices. A clear movement in the marketplace can be observed from higher priced to lower priced residential properties. During the second quarter of 2005, 14 properties over $1 million were sold. During the past seven months, only one property had a selling price that exceeded $1 million. The median selling price during the third quarter was $340,000. Part of the reason for this phenomenon is the increasing difficulty buyers are having obtaining financing for “jumbo” loans – those with loan amounts that exceed $417,000. While loan underwriting standards have increased across the spectrum of loans, the higher value mortgage market has been especially constrained by the global financial turmoil. The geographic distribution of sales across the island has also witnessed change. Between April and June of 2005, the villages of Avon, Frisco, and Hatteras were the focal points of buyer interest. During the third quarter of this year, residential sales were more evenly spread among all seven villages, although Avon and Frisco continued to report the highest numbers of sales. Finally, the number of residential properties under contract to be sold is still exhibiting a downward trend. You may recall that when the tech stock bubble burst in 2001, money from the stock market flowed fairly quickly into real estate. When charting the path of the decline in the Dow Jones Industrial Average over the past year, no significant upward movement in the number of properties under contract to be sold on Hatteras Island is evident. My sense is that the simultaneous decline in the housing market, the stock market, and the national and international financial markets combined to form a set of circumstances that is causing our local real estate market to languish. It should be noted that on a relative scale, the market for residential properties is much more active than the market for lots. To some extent, this situation is also associated with the availability of financing. It is my understanding that in addition to lenders evaluating the credit worthiness of unimproved lot buyers, lenders are also scrutinizing the financial stability of their builders more closely. If I were to summarize the current state of the Hatteras Island real estate market, I would say that some components have stabilized while others are still trending downward. The number of residential properties that are listed for sale has remained relatively constant over the past year, ranging between 450 to 500 homes per month. Similarly, the number of homes sold per month has remained consistently around 10. The comparable figures for unimproved lots are an average of 315 home sites for sale and four sold each month. At the current sales pace, these figures equate to a 45-month supply of homes and a 78-month supply of lots. As long as supply continues to exceed demand by such a wide margin, it is difficult to see how prices can increase. Comparing the third quarter of 2007 with the third quarter of 2008, the median selling price of residential properties showed a decline of 16.5 percent. The data for unimproved lots using the same comparison reflected a 24 percent decline. Looking at all of the charts and statistics as pieces of a complex puzzle, my opinion is that the overall picture shows a market that is bouncing along the bottom of a multi-year trend, waiting for some positive economic stimulus to kick-start the next upward cycle. One conclusion seems to be inescapable, and that is that there are a lot of attractive opportunities for buyers in the market today. Some of the bank-owned and “short-sale” properties being offered for sale are especially strong purchasing opportunities. The experts tell us that the time to buy is when everyone else is sitting on the sidelines paralyzed by fear, doubt, and uncertainty. If you have ever dreamed of owning a place at the beach and your circumstances allow it, this is a great time to be a buyer on Hatteras Island. (The statistics contained in the article are derived from the Outer Banks Association of Realtors Multiple Listing Service database. This information is deemed reliable but not guaranteed.) (Tom Hranicka is an associate broker with Outer Beaches Realty. Questions, comments, or suggestions for future articles may be sent to Tom Hranicka at P.O. Box 237, Avon, NC 27915, or e-mail to hranicka@hatterasisland.com ) Copyright©2007 Tom & Louise Hranicka. All rights reserved. 
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