Real Estate markets are local. I remember before I moved to the Outer Banks in 1998, how much of a bargain the homes appeared when compared to New Jersey, Delaware and the Mid-Atlantic area coastal areas. At the same time, Outer Banks locals and real estate professionals were not as enthusiastic toward their local market. Sometimes, when something is right in front of you, you don’t notice…can’t see the forest for the trees. In my mind, the value was apparent when compared to other like areas.
The efficient market hypothesis suggests that it is impossible to “beat the market” because prices already reflect all relevant information. The hypothesis is usually applied to the stock market. Back in 1998, the real estate market was less efficient because all relevant information was not readily available.
Back in 1998, the thrill of the chase, to find the needle in the haystack bargain, was alive and well. Granted, I focused more on the distressed side, before it was fashionable to do so. Today, the market is more efficient; due to the internet and quantity and quality of information available. Is it 100% efficient? No. It is much easier today to research an area and a particular property than it was only 10 years ago.
Aggregating the data and making sure all relevant information is included is still difficult from a distance. As Seth Godin stated in a recent blog titled– You Can Look It Up, “It still takes talent and time to find the right thing in the right place at the right time.” This is where the knowledge and experience of a local real estate Agent can save you time and provide relevant insight.
One cannot view real estate in a vacuum. It is affected by local forces, politics as well as national policies. With a new President in office, sympathetic to real estate interests, have a positive effect? Increasing mortgage interest rates will impact the market depending on how fast and steep the rates increase. Will the H2OBX Waterpark increase investment in the area? For more information on “big picture” influences on our market, check out this post.
If I look at today’s Outer Banks market with the same eyes as when I was not a local, the recovery is similar. The market is healthy, but not red hot. Are there good deals to be had? Absolutely! Read below for some of the other insights revealed from the 2016 year end MLS statistics. Download the Outer Banks MLS Year End report here.
The unit sales for 2015 compared to 2016 is almost identical. New Listings during 2016 tracked below 2015 levels for all but two months. Total new listing in 2015 were 4432 vs 4043 in 2016. The gap between monthly sales and new listings is narrowing and should help drive the prices up.
The amount of distressed inventory in the Outer Banks market has fallen significantly since the recession and returned to a more typical level. The number of short sales sold fell by 58%, and bank owned sales fell by 24% from 2015 to 2016.
At the same time, the average sale price of short sales increased by 24%; while bank owned average sale price increase by only 1%. The chart below shows the narrowing of the gap between distressed inventory and sales from 2015 to 2016. The overall impact on the market from distressed properties has waned and is one of the signals the market reach bottom and has turned around.
Residential Sales & Condos
Single family detached unit sales were strong in 2016. Sales in 2015, at 1539 units, was the second best year since 2005 with 1819 units. Sales for 2016 were 1531 units tracking closely to the second best year.
Total Condo sales in 2005 reached a record of 178 units and 2016 met the record sales level. The break down by month for 2015 and 2016 with the median prices appear below.
Unit sales of condos increased by 24% between 2015 and 2016 with a 32% increase in volume, 6% increase in average sale prices and 7% increase in the median sale price. Unlike many other markets, the Outer Banks did not see an over supply of condo construction during the boom years and current demand for condos has been strong.
There were 469 lots sold in 2016, which is the identical quantity as 2015; the total dollar value increased by 2%, a 2% increase in average sales and a 2% decrease in the median sale price.
The long term inventory trend for Residential, Land and Commercial is trending downwards. As inventory decreases prices should make moderate increases.
Price per Square Foot
The price per square foot showed a great deal of variability over the past 4 years but has leveled out over 2016, most likely reflecting the reduction in distressed property. In some cases, during this period, the cost of new construction was far above these levels.
The absorption rate in Jan 2016 was 62.38 weeks and ended the year at 35.9. This is the number of weeks it takes to sell the current inventory at the current rate of sales. This is further evidence showing the declining inventory and will likely begin to trigger increases in prices. Over the last 4 years, the average Days on Market (DOM) has stayed in the 200 range.
Sales by Price Range
In 2015, 6.9% of total sales was in the price range above $749.9k; and in 2016 the average in this range fell to 6.6%.
In 2015, 10.6% of total sales was in the price range between $500k and $749.9k; and in 2016 the average in this range fell to 9.5%.
In 2015, most activity was in the $200k to $499.9k range and represented 57.9% of total sales. In 2016, this price range accounted for 64.4% of total sales and taking a larger piece of the pie.
After Jan 2016, the number and percentage of the total sales for real estate below $200k was below levels in 2015. In 2015, 24.5% of total sales was below $200k; and in 2016 the average was 19.3%. The inventory and sales of real estate below $200k is eroding. The reduction of distressed real estate in the Outer Banks market is likely to continue and fewer properties will be priced below $200k.
Sales by Area
The number of units sold in each area or town increased by more than 25% for Roanoke Island, and fell by more than 12% in Southern Shores.
The 2016 median sale prices for the towns in the Outer Banks and the percent change compared to 2015 appear below:
Estimated value of new building permits increased to $164,806,963 in 2016 from $150,918,527 in 2015. There were 183 residential new construction building permits issued in 2016.
What will 2017 bring to the real estate market? I predict steady and good long term growth. There are local factors, like the mid- Currituck bridge and development of H2OBX Waterpark, that bodes well for infrastructure and commercial development; a good foundation for continued growth.
Economic factors, like the anticipated increase to mortgage rates, will tend to put a damper on home price increases to maintain the same affordability level. Financial media expects 4 mortgage rate increases in 2017. This should create an urgency for purchase transactions to be completed earlier in the year.
The vacation rental market remains strong as new inventory has not kept pace with market demand. Prices for vacation rental property investments are stable but increasing. Rents are adequate for covering expenses and more Outer Banks vacation rental properties are experiencing positive cash flow.
If you add up all of the factors, you will realize that Outer Banks is an ideal place to plant your “feet in the sand” and buy or build your castle. You can design the beach house of your dreams or choose from the many beach houses already for sale. Start making memories with your family in your own rental home while profiting from positive cash flow and other ownership benefits.
If you live in the Outer Banks, learn how you can stop throwing your money away with rental receipts and own your own place for perhaps even less than you are paying in rent. Learn how the tax advantages of home ownership can change your bottom line and earn equity for years to come.