 |
|
|
November 23, 2009
Hatteras Island Real Estate: Third quarter market summary
By TOM HRANICKA
I suppose any evaluation of real estate market conditions depends to some extent on the perspectives from which the indicators are being viewed. All things considered, I think we are seeing the start of the next market cycle in residential properties, while conditions for unimproved lots are still awaiting signs of a turnaround. The good news is that buyers are beginning to return to the marketplace in meaningful numbers as they recognize the values to be found. Residential Properties Residential sales during the third quarter continued to reflect an improving market environment. The inventory of cottages and condominiums for sale is noticeably declining, while the number of sales is increasing. Sales in the third quarter of this year were 64.5 percent above than the same period in 2008. In addition, the number of sales has increased steadily since the beginning of the year. While the supply/demand curves are trending in the right directions, there still remains a fairly wide gap between the inventory of properties for sale and the corresponding level of purchases. This excess supply of homes, combined with the influence of distressed properties in the market, continues to exert a downward pressure on prices. The average residential sale price during the July to September quarter was 27.7 percent lower than in the third quarter of last year. While it would not be unusual to see a slowdown in sales during the winter months, it is important to note that the Hatteras Island Pending Home Sales Index, an indicator of future sales activity, has risen steadily since last December. The simplest summary of today’s residential market is - more sales at lower prices. This theme is also being seen in other markets across the country. The enhanced affordability that attractive prices offer is causing an increasing number of buyers to comment that they do not want to miss the opportunities that exist at the present time. Unimproved Lots From one point of view, current market conditions for unimproved lots are not as encouraging as those that we are seeing in the residential market. On the other hand, from an historical perspective, some recent lot sales suggest that we may be very close to the market bottom in at least some locations. For example, two home sites in the Hatteras Pines Subdivision in Buxton recently sold for $50,000 each. I have a plat of the subdivision from a time when most lots were still unsold which shows the asking prices of these same properties as $52,500 and $54,000. Keep in mind that it is only in hindsight that we know when the bottom of a market has been reached after prices have once again started rising. While there has been a substantial decline over the past few years in the number of unimproved lots that are being offered for sale, we are still waiting for the level of sales to start rising. Like residential properties, the surplus of supply vs. demand has caused the average sale price of lots to decline 52 percent between the third quarter of 2008 and the third quarter of 2009. If you have been considering buying a lot and building the island home of your dreams, now looks like an ideal window of opportunity. Not only have some land prices become very attractive, but construction prices have become more affordable as well. Distressed Properties This year, foreclosures and short sales have had a noticeable influence in the Hatteras Island real estate market. Through September the number of foreclosure filings on the island equaled the number of reported sales of homes and lots. Foreclosed property sales represent about 31.5 percent of all residential sales since January, and short sales account for another 7.3 percent for a combined total of almost 40 percent of all sales on the island. While the absolute number of residential foreclosure filings on the island remains relatively low, on a percentage basis foreclosure filings during the third quarter of this year were 121 percent higher than the same quarter in 2008. This trend is most likely being driven by the same factors that are present in the national market – interest rate resets on adjustable rate mortgages, selling prices that are in some cases lower than mortgage balances, negative cash flows, and employment/income concerns. The silver linings in these patterns is that as prospective buyers have recognized the values to be found in some distressed properties, the number of foreclosed homes for sale has decreased. At the same time, the ongoing national economic slump and declining prices are causing the number of properties being sold as short sales to increase. A short sale is a situation in which the homeowner owes more on their mortgage than the price at which the property can be sold. This is sometimes referred to as being “upside down” or “under water.” As I evaluate the statistics and the general feel of the market, I am sensing some of the same factors that existed in the mid – 1990s when the island’s real estate market was emerging from that downturn. Prices are low. Sales are increasing. Multiple offers are being seen in some negotiations, and buyers are re-entering the market place. From both an objective and a personal standpoint, I am struck by how difficult it is for us to break out of past patterns of behavior. How many times have we said to ourselves or to others, “If only I had bought that property or made that investment when …….” Here we are face to face with a set of market conditions that very strongly suggests that we are near the bottom of a real estate cycle. Yet, it seems to be very hard to say, “I am determined not to make that mistake again” and to take action based on our experience and our gut instincts. Once again, we find excuses to delay our decisions and to defer our dreams. I am sure that I don’t know what the answer is to this aspect of human behavior, but I am equally sure that for those who have the courage to break the pattern, there is the potential for some very good outcomes ahead. (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©2009 Tom & Louise Hranicka. All rights reserved. |
|
  |
|
|
|