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By Kip Tabb
“Market correction” is such a safe phrase––easy to say, clinical, almost sterile, in the clipped voices that commentators use when speaking it. It places a certain intellectual distance between economic experts and homeowners, a distance that provides a feeling that given time, everything will be all right. That is, of course, unless it is your house that is being corrected.
Everyone throws numbers around, and with enough imagination and perspiration, those numbers can indicate just about anything. Nonetheless, at the heart of what is happening in the real estate market today, those numbers indicate that in a very real sense, there is a market correction (i.e. things are slow).
The question isn’t “Are things slow”, or even “How long will things be slow”, but “How does this affect me?” Ultimately, all these numbers are about people––those who hope to sell a house and those who wish to buy one.
The numbers, or statistics if you will, can give an indication of trends, providing helpful insight with which to make decisions. So we thought it would be meaningful to look at some numbers and see where the potholes lie and if there’s a silver lining out there.
According to the Outer Banks Association of Realtors (OBAR), at the end of February there were approximately 1800 to 2100 listings on the Outer Banks. That’s roughly twice the total number of sales recorded in all of 2006. The following comes from the OBAR Multiple Listing Service data:
Dare Beaches North of Oregon Inlet
Year # Sales Av. Price Av. Days on Mkt. %List to Sale Price
2002 1087 $310,241 127 97.9
2003 1128 $376,149 132 97.6
2004 1351 $460,089 143 97.4
2005 1147 $511,301 135 96.8
2006 666 $463,960 149 95.8
Although this information shows 38.7-percent drop in the number of sales, a silver lining can be seen here too. With the exception of 2006, the 5-year data shows that the average price of a home increased 49.5-percent, and only a three-week increase in the average number of days on the market. Sellers are still getting more than 95-percent of their asking price.
Homes that are priced to sell continue to sell relatively quickly. This underscores the message experienced realtors have been giving their clients since the current downturn began. If you wish to sell, be competitive––an over valued home is not going to move in this market.
“Properties that are perceived to be exceptional values are selling,” Jeff Scott, president of Scott Team Realty says.
There are pockets of strength in the market. Year ‘round residents are continuing to purchase homes. In Colington, the 4-year average number of sales fell by only 28.7 percent while the increase in the average sale price rose by a whopping 71.4-percent.
Colington
Year # Sales Av. Price
2003 122 $199,360
2004 191 $264,147
2005 124 $292,682
2006 87 $341,639
There are, of course, no guarantees, but the signs appear favorable for strength in the year ‘round residential market. The recently published, “The North Carolina Economic Outlook” from North Carolina State University, predicts modest growth in wages and employment and a five percent increase in retail sales for the region. Because retail sales are the economic engine that drives the Outer Banks economy, all three indicators seem to point to a stable employment base with a rising income.
Cristina Garey, a broker with Colington Realty, focuses exclusively on residential home sales, and her observations confirm these numbers. Since the beginning of the year, she has noticed a turn-around.
“Things have improved substantially,” she says. “I think our market went through a correction and prices came down a bit and now things are selling again.”
Strength exists in other areas too. Hatteras Island with its broad mix of year ‘round residents, vacation rentals and second home owners, in particular, has held its value well, growing by 32.7-percent in average sales price, and the number of units sold has declined less, at 27.2-percent, than any other area on the Outer Banks.
Hatteras
Year # Sales Av. Price
2003 287 $399,766
2004 395 $491,024
2005 389 $537,177
2006 209 $530,344
Corolla is perhaps one of the most enigmatic markets on the Outer Banks. With a little over 500 permanent residents and the beaches dominated by luxury vacation rental homes, the market is geared to the investor.
Currituck Outer Banks
Year # Sales Av. Price Av. Days on Mkt. % List to Sale Price
2002 317 $545,473 170 97.9
2003 266 $745,181 130 97.6
2004 274 $787,613 139 97.4
2005 228 $1,005,700 139 96.8
2006 120 $933,111 Not Available Not Available
As an investment, the Corolla area is a proven shining star, but this is a market for an investor with a long- term goal. Although the 5-year average selling price went up 71.7-percent, more than any other area on the Outer Banks, the number of units selling has shown the largest decline at 62.1-percent.
Beach properties in general have held their value, but there is a huge supply of inventory on hand. Investors as sellers should be prepared to wait out the current surplus.
There are approximately 223 oceanfront properties for sale in Dare County at this time and there are 58 on the Currituck beaches. Still, Corolla is keeping pace. With about 20-percent of the total beachfront inventory, Currituck still had 15 of the total 81 oceanfront sales last year, which is also about 20-percent. Moreover, the average Dare County oceanfront property closed at $1,253,911 while Corolla enjoyed a hefty average of $2,114,595.
The strategy of purchasing a house and quickly selling it for a profit, used successfully two or three years ago, or building on speculation, is more challenging today.
“It is not a market where a quick flip of a property is going to be easy,” Gray Berryman, of Carolina Designs Realty in Duck says. “You can do a quick flip, but you’ve got to have a very high tolerance for risk.”
In many ways, the Outer Banks housing market is a microcosm of the larger U.S. market. The market began to retreat in 2005 and became very soft last year. Part of the shock of this trend or “correction” is that is has not been seen for almost 20 years.
If that era is a model for comparison to the current downturn, the market began making a noticeable upturn within 18 months. Within another two years it regained much of its lost ground. However, that comparison only goes so far.
For example, the country was mired in recession at that time, and the unemployment rate was 7.5-percent. Compare that with recent statistics. The statewide unemployment rate for 2005 was 4.9-percent (4.2-percent in Dare County).
So, cross your fingers, take a deep breath. Maybe things really are getting better.
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