Septic Issue Explained

OBX Realtors Conversation on New Septic RulesFrom what I have been told, there were many meetings amongst lots of organizations, Homebuilders Association and NC Realtors are included in the reshaping of the wastewater regulations. Negotiations were settled, the meeting concluded, and everyone went home. The night before the vote, the bill is sent out. Unbeknownst to all signings, changes were made in favor of the Septic Tank Association’s lobbyists, resulting in the incoming “shituation” we have now. This DID come from the private sector and the only way out of it is legislatively.

SO WE HAVE TO ACT!

Our local Realtor Association had a meeting on January 30th with the Dare Supervisor for Environmental Health, Josh Coltrain. A video of that meeting can be seen here. It is 36 minutes long, but well worth your time to watch.

If you don’t have time to watch, here’s the basic breakdown and major takeaways:

  • The regulations are retroactive. Doesn’t matter when your home was built, this now
    applies to EVERYONE.
  • Any LOT platted BEFORE January 1, 1983, with a septic for 4 bedrooms or less can still qualify for a conventional gravity system.
  •  Any LOT platted BEFORE January 1, 1983, with a septic for 5 bedrooms or more is mandated to show a designated repair area and is affected.
  • Any LOT platted AFTER January 1, 1983, regardless of number of bedrooms is mandated to show a designated repair area, and is affected.

So basically, if you are on a LOT with a designated repair area, these regulations apply to you. If your system fails for ANY reason:

  • The local Environmental Health Soil specialist is no longer allowed to use the best professional judgment.
  •  You now MUST use the designated repair area. No matter if it’s covered by live oaks, uphill, downhill, at the back of the lot. Doesn’t matter, it’s the new spot.
  •  You now MUST move to an engineered system. This is a cost factor of TEN TIMES more in most cases than a conventional gravity system.

With 90% of LOTS in Dare County having an onsite wastewater system, this impacts an enormous group of homes. This is simply not sustainable.

The meeting that Josh Coltrain was to attend in Raleigh this week was postponed. I don’t have the new meeting date at this time. What I do have is an email you can send questions to for
Josh to take to this eventual meeting to ask. That email is [email protected]. Feel free to send any real life scenarios you may have encountered, burdens these regulations have already
caused or just questions you want answers to from our legislators.

In the meantime, the NC Senator for District 1 (Dare) is Norman Sanderson and his information can be found here
Bobby Hanig, NC Senator for District 3 (Currituck) can be found here

I’ve already been in touch with both and have had great response from Sen Hanig’s office. NC Realtors has legislative committee members hard after this issue as well. This is a statewide
issue so if you have any connection to any NC State legislator, let them know this must change!

WE NEED TO MAKE SOME NOISE!
If you want to find out how this specifically impacts your home personally, call the Dare Environmental Health Department at 252-475-5080. Or Currituck at 252-232-6603.

I’ll keep you informed as I have more updates.

February Market Report

With all the insurance and septic news, I’m going to be brief on this month’s market report and just give you the numbers straight up. With only one month in, there isn’t a lot to analyze anyway.

Not much has changed since December, except in Kill Devil Hills showing the only noticeable difference. Which is not unusual for this time of year. We will compare again in April and see if anything changes.

Area Active Now Active Dec

Area  Active Now  Active Dec
Corolla 81 88
Duck 16 17
Sshores 16 17
Kitty Hawk 15 18
KDH 49 60
Nags Head 43 40

Not a lot going on just yet, but don’t worry things will heat up in a few weeks! I’ll be watching.

If you’d like more information on buying or selling, please reach out.

OBX History Repeats Itself

Image of the Ocean on the Outer Banks, NCHistory repeats itself.  A saying I’m sure you’ve heard and said dozens of times.  I might not yet be a half of a century old, but I’m old enough, and have been in this business long enough (27 years) to recognize a similar pattern.  Let’s revisit the timeline of the Outer Banks real estate market from the year 2000.

Year/Sold        Units Sold         Average Price Sold 

2000               n/a*                  $275,000       *I don’t have access to the # of sales that far back

2005               2104                 $555,973

2008                1045                 $427,718

2011                1333                 $370,569

2014                1611                 $370,351

2017                1995                 $385,774

2019                1966                 $400,592

2020                2614                 $520,009

2021                2889                 $668,994

2022                2096                 $770,901

2023                1446                $746,351

Looking at the raw data above for single-family home sales, here’s what we see:

  • Between 2000 and 2005, there was a building boom and a huge spike in demand due to the subprime loan accessibility.
  • 2005 was the peak of that bull cycle – 2006 slowed, 2007 started looking quite ominous.
  • 2008, there was a 50% drop in buyer demand or the number of homes sold.
  • 2011 – 2014 was the lowest point, with a 32% overall drop in pricing.
  • In the 8 years from 2011 to 2019, pricing stayed flat, only going up 5% overall.
  • By 2019, buyer demand came within 7% of the peak number of sales in 2005.
  • Right on schedule, 20 years from when the boom started in 2000, a new cycle started.
  • Buyer demand shot up, and pricing came back to just under the 2005 peak.
  • Notice now that in 2023, the first step to a declining market, just like in 2008, is a drop in buyer demand. An exact replica of a 50% drop in home sales from the peak in 2021.
  • This time, the 2022 peak pricing was 39% higher than the peak pricing in 2005.
  • If the market drops at 35%, pricing still hovers over $500,000.

Now, I know that is a lot to unpack. All of this data is telling me that the drop in home sales is a clear indication that we have reached the peak and are on the way back down and soon. The last peak was in 2005, and the crash is attributed to 2008. That 32% decline in pricing didn’t happen overnight. It was spread out over a few years.

So, what does all of this tell us?

  • First, based on the last cycle, even after the crash, the average price still never went below $300,000.
  • If the same holds true, pricing will return to $500,000 after this cycle, but you’ll never buy beach homes for $370,000 again.
  • I expect to start seeing a decline in pricing by the end of this year. It will be subtle at first but will pick up over the next year and the year after.
  • Unlike the mortgage crisis last time, this cycle will be caused by UNAFFORDABILITY.
  • Most importantly, the homes in this cycle are older, and many are not updated (many are over 20 years old). The condition will outweigh any other feature once the inventory spikes due to cost and inconvenience of remodeling out of state. See my previous blog about insurance requirements.

Let’s talk about unaffordability for a minute. This is not just an interest rate issue. In fact, even if interest rates come down to 5% again, it will only create a small impact on the overall cost of owning a beach home.

Consider this:

  • Rising insurance costs. You can read the article in my newsletter about the recent rate increase request. While they have not historically gotten what they ask for, they’ve always gotten something. It’s already too expensive.
  • Mortgage debt to income is stretched to 50% on conventional loans and 48% on Jumbo loans to qualify. That just means qualify. How sustainable is a 50% DTI long term?
  • Car insurance is seeing the fastest rise it’s ever experienced, with an average 22% increase year over year.
  • Utilities are rising.
  • Construction/remodeling costs are the highest on record at over $300/sq ft.
  • Rental occupancy is down 10%. While the rates are still elevated from the COVID years, that will quickly change if occupancy stays down.
  • Real estate taxes are rising. Not so much here on the Outer Banks, but on your primary home in other states.

So, does this mean I’m saying it’s not a good time to buy? Not at all! It’s just not a good time for EVERYONE to buy. How so?

  • If you are a LONG TERM investor, you will be fine. Even those who bought in 2005 at the peak made money in 2021 or 2022.
  • Don’t buy anything that the rental income doesn’t at least cover the mortgage. Lowers your risk.
  • If your DTI is at 40% or lower, your risk is very low and manageable.
  • Real estate is a tangible asset. While the markets do fluctuate, they also never in history have gone to zero or even to the last cycle’s low.

However, if you are a current homeowner and your retirement plan includes the proceeds of this home, you may need to really consider how long you can/want to keep it. If you aren’t in to see this next cycle through, you have a prime time this spring to take advantage before what I believe is the end of this bull market.

Factor in the waning rental occupancy, rising costs, and the boomers knowing it’s time to cash out, it appears we will see an influx of inventory this spring. That will be the one catalyst to start a more rapid decline in pricing.

Please know that it’s never my intention to be a downer; I’m just a realist. You can’t avoid what you don’t see coming. It’s coming. I was taught that you can’t make the best decisions without looking at all the information. Please reach out if I can help you strategize your move in 2024.

New Septic Rules Effective January 1, 2024

New Septic Rules Effective January 1, 2024

New septic regulations adopted by the NC General Assembly become effective on January 1, 2024. These rules affect the repairs of existing systems and establish guidelines for new systems classified as high-capacity uses, such as restaurants, churches, and other similar uses. The information included below is from the Dare County Health Department, listing several concerns with the new rules:

  1. The applicability of the rules as it pertains to the installation of repair systems for systems permitted prior to January 1, 2024 The new rules are not supposed to apply to systems that have an IP (Improvement Permit), EOP (Engineered Plan), NOI (Notice of Intent to Construct), etc. issued before January 1, 2024 except for when the repair system is to be installed.  This means homeowners will now be forced to contract with an engineer to design advanced pretreatment systems for the designated repair areas (see concern number 2 below as concerns 1 and 2 are closely linked).
  2. Loss of best professional judgment for EHSs.  The ability for local staff to use their experience working with local soils and environment has been severely restricted.  DEH staff will no longer be able to work with people on challenging repair situations.  Forces use of designated repair areas which often may involve use of some form of advanced pretreatment creating an exceptional financial burden on property owners.
  3. The labeling of all uses that fall into certain categories as high-strength wastewater Churches, schools, RV parks, restaurants/food service, etc. The rules force the use of advanced treatment equipment when designing systems to serve these uses. These systems cost more to install and require significant ongoing O&M costs.

Dare County officials are evaluating the potential for revisions to the rules in the 2024 legislation session. The Government Affairs Committee will be discussing these new rules at their December meeting, and additional information for OBAR members will be forthcoming following that meeting.

November OBX Update

Image for November blog post

Let’s take a basic approach this month.

Here’s what we have:

Inventory is generally the highest in our spring market.  This year, we are seeing a 26% increase in inventory in fall versus spring.  That’s pretty unusual.

  • Spring Average Inventory – 280 homes
  • Fall Average Inventory – 380 homes

Similarly, sales are also at their highest in the spring market.  Here, we see a normal 14% drop so far for fall.

  • Spring 3-month average sold – 170
  • Fall 3-month average sold – 145

It’s still not taking long to get properties sold.

  • Median days on market is still pretty low at around 3 weeks.

Pricing hasn’t changed very much, despite seeing more price reductions.  We aren’t seeing a tangible change just yet.

  • Median price in spring vs fall is hovering right around $540,000
  • 59% of closed properties sold UNDER asking price
  • 22% sold AT asking price
  • 19% sold MORE than asking price

While mortgage applications are down, it’s not impacting us yet.

  • 30% of all sales in September were cash

Bottom line is for now, things are still moving along.  However, there are these subtle differences.  Markets don’t change all at once.  It happens little, by little, by little, then all at once!

I’ll be watching.

August Market Update 2023

August on the Outer Banks

We are closely watching the main stats on supply (up 33% since January) and demand (down 44% since January).  Part of that is watching more specific pockets of activity to glean a closer insight into future trends.  One of those trends I’ve noticed in my near 30 year career is that of high-end home sales.

Take a look at the numbers for Duck and Corolla.

Homes sold $2M and over:

2019 –              6

2020 –              26

2021 –              64

2022 –              51

2023 –              17 YTD  (Likely on track for 27 total)

    • Even if we end up at 27 sold, that will be a decline of 47% year over year.
    • Number of price reductions to get homes sold is going up; 60% of properties sold are under list price, compared to 51% last year.
    • Median days on market for the high-end sales has gone from 21 days to 93 days year over year.
    • There are currently 30 homes for sale in Duck and Corolla $2M and over. With basically 2.4 buyers a month this is over a year worth of inventory.

With interest rates rising, insurance costs rising, rents stabilizing to pre-pandemic times, it’s really clear that a shift in pricing has to take place.  The timing of this is what’s left to be seen.  This strange anomaly of still very low inventory (although is starting to slowly climb) is keeping us stuck in limbo.

If you’re thinking about selling, let’s talk about what your home’s value may look like in this market.

Insurance Companies are Tightening Guidelines

Insurance companies are tightening their underwriting guidelines and limiting coastal exposure, in addition to jacking prices way up.

Here are the changes to note:

  • Markel – One of the more affordable companies will NOT insure any home built in the 1980’s or that is known to have or have had polybutylene plumbing. Even if it’s all been removed and replaced – NO.
  • Frontline – Another very affordable option will not insure anything built prior to 2005. Or give a homeowners policy on a roof more than 15 years old.  Most company’s limit is 20 years.  (You can still get a dwelling policy – but the coverage is nowhere as good, and the price is higher)
  • Farmers Insurance – They have pulled out of Florida completely. Who knows what other coastal community might be next?
  • NCIUA – This is becoming one of the better options but has a cap of $750,000. So additional riders are needed, which can get costly.
  • Under-insured – Most homes today are underinsured. At a meeting with our President and General Contractor recently, he quoted the base square footage price for building a new home today at a minimum of $300 per sqft!

With Nationwide pulling out of coastal markets, Farmer’s doing the same in FL, and many others really tightening their guidelines, we could really use a few years of very minimal hurricane activity!

If you need more information on the best insurance options for your OBX home, do please call Steve Bonday at 252-331-8233 or email at [email protected].

July Market Update

Happy 4th of July on the Outer BanksMid-year is upon us and not much has changed since the last report.  I did notice an interesting trend regarding CASH in our marketplace.  Here’s the deal.  There have been 136 home sales in Duck and Corolla since January.

Of those 136 home sales:

  • 32 Cash
  • 13 Jumbo Loans
  • 91 Conventional Loans

A conventional loan amount is $726,200.  With the typical 20% down, that means a purchase price of around $875,000.

  • Only 53 of the 136 homes sold were under $900,000
  • 83 homes sold over $900,000 up to $6,300,000
  • 13 were jumbo loans
  • 22 were cash
  • The average price is $1,251,000
  • The median sales price is $992,500

A jumbo loan amount is anything over the $726,200.  There were only 13 of those reported.  There were 48 Conventional loans in the $900,000 and up price range.  This means that 48 buyers out of 83 brought enough cash to the table to get their mortgage at or under $726,200.

To paint a clear picture – 32 cash buyers, 48 mostly cash buyers.  That’s 80 buyers (60%) who brought a ton of cash to the closing table to buy a home on the Outer Banks.  Including the highest sale of the year so far – $6,300,000 ALL CASH!!!!  This just seems amazing to me. (Here’s a link Click Here to View Listings to that home if you want to see what $6.3M gets you)

This is a clear indication that buyers have no problem parking cash in a beach home right now.  I mean, why not?  Let’s look at the 3 main reasons this could be a good idea.

  1. Rental income – If you choose to rent, the income will at the very least cover your mortgage. That means, future equity you reap, all paid by SOMEONE ELSE.
  2. Bank Failures – With banks failing across the country, and the Dodd-Frank Bill legalizing, if not mandating, “bail-ins” a lot of people don’t feel safe keeping their cash susceptible. Rather, they are investing in a tangible asset, and one they can enjoy themselves and have others pay for!
  3. Inflationary Fiat Dollar – Let’s get real, the price of real estate will NEVER go to zero. As inflation spikes even more and more out of control, the dollar is tumbling closer and closer to zero.  It seems buyers are hedging their bets on the tangible asset of real estate versus the tumbling value of the dollar.

We haven’t even begun to see the effects of the commercial real estate crisis looming.  This is widely affecting regional banks who are holding the notes on these buildings that are sitting empty in record numbers across major cities.

Don’t get me wrong, my message is not of doom and gloom.  What’s going to happen is going to happen.  My point is, what is your best move?

If you are considering selling, there are cash buyers waiting for your home.  We do have investment vehicles where you can put your money and AVOID capital gains tax in the meantime.  Contact me for more information.

If you are thinking about buying, get off the fence and don’t let the interest rates deter you.  You won’t have much competition buying right now and there are some great opportunities out there!

Welcome Summer!

Welcome Summer! Now that Memorial Day is behind us, it’s officially our summer season. It started with some interesting weather! I read that June is predicted to be cooler than normal. Once again reinforcing my pick for September as the best month on the OBX.

Market Report – I have to say in 26 years of being in this business, the market we have right now is the most odd I’ve ever seen. We have a lack of buyers AND a lack of inventory. With two major banks pulling out of the resort markets, there’s a bit of uncertainty to come. Read June’s FULL Report Here!

Mid-Currituck Bridge – No real construction news, but a win in the fight. The SELC has decided NOT to appeal the recent court’s decision. This will certainly save some time. While the plan seems to intend on moving forward, the environmental studies will all have to be re-done since they are more than 3 years old. Full article here.

Tax Deferred Exchange – Did you know it’s possible to sell an investment property and defer capital gains tax, WITHOUT having to do a 1031 Tax Exchange and buying another property? I have a handy PDF document I can send with more information if you’re interested. Just email me back to request it.

Happy March! 

The Month of MarchWhat a mild winter we have had here at the beach so far.  We are not complaining, that’s for sure.

I’ve got a couple of pretty interesting topics this month…let’s dive in.

Market Report

Anyone who knows me knows I’m generally an optimist by nature.  I have to say some of the economic factors going on are raising my level of concern for our local market this year.  While the OBX is a primarily second home market, we are late to see the effects of the primary market shifts.  Believe me, changes are on the way, click here for more.

Mid Currituck Bridge

Ah yes…the long-awaited bridge.  If you’ve been waiting around for this thing since the 90’s like me, you will probably see this as a nice reminder this project is not completely dead, and also hard to get hopeful again.  Read more here.

Taste of the Beach

Yes, it’s March and time for my absolute favorite OBX Event of the year!  If you’ve never been, you are missing out on some of the best dining experiences we have to offer.  If you can make it to town the weekend of March 24 – 26th, you won’t be sorry!  Let me know what some of your favorites are!  Click here for the event website.

Agent of the Year

I was honored and excited to receive this award again for 2022.  I’m grateful to my wonderful client base and friends for the amazing support I’ve had in my career.  This is year 27 for me in the business.  I have been very blessed. Read more here.