Real Estate and Business

February 2, 2011

Hatteras Island Real Estate: 2010 was a pretty good year

All things considered, it appears that 2010 was a pretty good year for the Hatteras Island real estate market. In fact, it may have marked a turning point in the real estate cycle for residential properties. The number of residential sales increased about 17 percent above 2009 levels, and the four-year decline in average selling prices came to a halt. This is certainly good news because, at a minimum, the data suggest that the island’s real estate market is beginning to stabilize.

On the other hand, results for the unimproved lot market presented a mixed picture. While the number of sales more than doubled, selling prices continued to decline, dropping 22.6 percent below the value reported last year.

Foreclosures and short sales were a significant factor contributing to the increase in the number of sales as well as the subdued level of selling prices. Distressed properties accounted for about 45 percent of residential sales and more than 58 percent of unimproved property transactions.

The number of residential foreclosure sales remained constant in comparison to 2009 but quadrupled for unimproved lots. Short sales substantially increased for both lots and houses as sellers became more aware of this alternative to foreclosure, agents became more comfortable with the relatively complex administration of this type of sale, and lenders became more receptive to allowing borrowers to sell their properties for less than the full mortgage indebtedness.

Since 2008, nearly 475 homes and lots have entered the foreclosure process on the island.

Interest rates reached a historic low point during 2010 providing an additional incentive for prospective buyers to take action on their plans to purchase.

There are lots of ways to look at real estate market statistics.

Usually, we compare the current year with the previous year to get some sense of market direction. At the national level, we often see month to month comparisons. In my opinion, the market is too volatile for monthly comparisons to have much meaning.

As I was thinking about last year’s results, it occurred to me that it might be interesting to see where the 2010 market indicators fell on a historical spectrum.

While there is less than a perfect correlation for where 2010 results fall relative to past years, the data suggest that our current market has retreated to roughly where the market was around the time that the most recent real estate boom began – about 2001. If this ends up being a reasonably accurate interpretation of the patterns, then it gives some credence to those who believe that the Hatteras Island real estate market moves in 10-year cycles, and it provides perhaps another signal that we should be just about ready for the market to turn around.

Looking back is easy; looking forward is the challenge.

My crystal ball suggests that 2011 is going to look a lot like 2010. We will probably continue to see a modest increase in the number of sales with residential prices remaining restrained. Hopefully, unimproved lot prices will start to stabilize. Until the inventory of foreclosures and short sales works its way through the system, selling prices will face a fairly strong ceiling, placing a limit on the potential for appreciation.

It will be fascinating to watch the year unfold and to see whether the market continues to strengthen or whether the complex interplay of economic forces will stall any recovery.

I have to admit that I am more than a little concerned about factors in the national and international markets that could affect us. Persistently high unemployment, expanding deficits, and economic and social upheaval in some foreign markets have the potential to throw our local recovery off track. In addition, interest rates are projected to rise to the 5.5 percent range by the end of the year.

The Hatteras Island market bucked the national real estate trends during 2010. Let’s keep our fingers crossed that we can do it again in 2011. How do you think events will play out?

(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 )
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