March 2019 OBX Market Report

Let’s take a quick look at the highlights of the market activity so far this year.

  • First Quarter residential sales are up by 4% from last year
  • Actual March sales are down from last March by 9%
  • Under contract homes are up 9% from last March
  • Inventory is on the rise. Up 9% from last March and the highest number of homes for
    sale since June 2017
  • Land sales are down 33% and average price went from $100,000 down 50% to $50,000
  • Distressed sales continue to fall with only 18 active listings in the entire area
  • New building permits last year total were 49, we are already at 33 for this calendar year
  • Overall rental companies are reporting a decline in the number of homes booked this
    year over last year

Summary: We had a slow start to the year for rentals because of the government shutdown.
Most of our visitors come from the VA/MD/DC area and with no income in January, fewer
vacations were booked. It does seem to be picking up some.

As predicted earlier this year, I am not surprised to see this activity report. We have solid
activity, but are not expecting a banner year, which is normal after coming off a few hot and heavy
years of activity. Nothing to worry about long term, just keep watching.If you feel like this might be the year to sell, but just aren’t sure, click here to read “What to do if you don’t HAVE to sell your home.”

What to do if you don’t HAVE to sell your home

So, what does all of this mean? Most property owners we speak to all say the same thing. “We
don’t HAVE to sell.” Which is very true, especially when a seller is not physically moving from
the home. The main reason they say that is because the pricing strategy presented in
alignment with the current market statistics is typically lower than they had hoped for.

It’s no secret, the Northern Outer Banks market is still in the midst of recovery, now with a
rising inventory. We’ve tracked these cycles for many decades and the results are always the
same. It’s a 20 year cycle. If the major down happened in 2009, we are merely half way
through before the next possible boom, based on recorded history.

Now, if you find yourself in the very common situation of having a home here on the OBX that
you aren’t using as much anymore, don’t like the current market price, and feel like you don’t
have to sell it, here’s what you need to know.

What exactly are my options if I don’t have to sell?

  1. 1. Recognize the big picture. Just because you don’t HAVE to sell, does not automatically
    mean that keeping the home is the best financial decision. Talk to your financial planner
    and tax advisor and get their opinion of the big picture financially.
  2. Consider the amount you personally use the home. If you’ve gotten to the point of
    only visiting the home once a year, it could actually end up costing you more in the long
    run to keep it. We have very extreme weather on the Outer Banks. Homes left alone
    with deferred maintenance can often times develop big ticket repair items the longer
    they sit.
  3. Place the home in a trust. If you have children who are available and willing to step in
    and take over the management of the home, there could be some tax advantages in
    your estate by leaving the home to them in a trust. Check with a tax advisor for more
    detailed information. I found this article helpful as a starter.
  4. Consider making improvements. Outside of the economic market conditions of supply
    and demand, one of the other reasons some homes are experiencing a challenge on
    pricing is due to being in the original state. Buyers today have very different
    expectations of homes than they did when I started in 1997. If you are planning to keep
    the home for a few more years, do the improvements, enjoy them, then sell when you
    are ready. One word of caution, consult a real estate professional first so they can help
    you maximize where to spend your money so it makes the most impact to a future
    buyer.
  5. Place the home as a year round rental. Yes, that means less income overall. It also
    means less expense. Tenants in a year round situation generally pay their own utilities,
    do the cleaning, change the filters and more. There is a huge shortage of affordable
    year round rental homes in the area. This is also something you can manage yourself,
    with very little time and energy. Hire a maintenance guy to check on the place and
    handle the minor issues that come up. If you’re already not using the house, why not
    have just one family enjoying it year round.
  6. Consider short term retirement in the home. So many buyers I’ve worked with over
    the years actually bought the home for future retirement. It’s unclear why more don’t
    actually do it. However, if you decided to just retire here for 5 years, enjoy the beach,
    do some improvements, the home could have a much different value then.
  7. Take a closer look at what the home is costing each year to own. This is probably the
    best advice I can give. More often than not, the amount needed to price strategically
    compared to the amount it will cost to own the home for another 3 to 5 years is usually the same. I know it can be challenging to drop that price another $25,000 in order to
    sell, but what will it cost you to own it annually for the next 5 years? That’s not
    including any major deferred maintenance that will come up along the way.

The truth is, timing is everything. If you’re ready to sell, take a serious look at these options
and decide the best course of action. First of all answer the most important question I
presented in the beginning….

Just because I don’t HAVE to sell, does that mean keeping this home is in my best financial
interests?

When you commit to looking at the big picture, as well as all other possible options and
calculate the best move for your situation. If you need help discussing these or any other
strategy, please feel free to reach out!

January 2019 OBX Market Report

The final numbers are in and as predicted, sales on the Outer Banks went a little flat. I wasn’t
expecting the rise in inventory to come along with it.

Reprinted with permission from OBAR is the following Director’s Report:
MLS Director Report – 2018 was a good year; however, they are some trends that bear
watching. Sales are flat (less than a 1% change) while listings in an Under Contract
status have declined sharply (9%). Inventory, on the other hand, is up (5%). Median
sale price, depending on area, is also flat.

Also worth noting is that specifically Residential Inventory (not including commercial properties
or vacant land) was actually up by 6% for the year.

If you didn’t read last month’s article, you can read it here. It’s a reminder that these real estate
cycles typically take 20 years to complete, at least according to 100 years of recorded history.
Since the cycle started in 2008/2009, we are only half way through. Holding on to a home in
this market, expecting it to improve in 12 to 24 months is probably not realistic. Looking for
change in 7 to 10 years is much more realistic.

If you are considering a long term investment here, prices are still low and rents are doing very
well! Interest rates are still around 5% and very reasonable. The outlook for 10 to 15 year
investors is strong.

As far as what we can expect for 2019? I would say more of the same. With rising insurance
costs, rising interest rates, stock market fluctuations, we will likely see the same amount of
activity for this year. Let’s just hope the inventory stays where it is.

If you’d like to see what the market value of your home is, contact me for a free evaluation.

December 2018 Outer Banks Market Snapshot

The big story for the Outer Banks Market as we inch closer to the end of the year is the decline in the number of homes selling, and the slight rise in inventory.  Here’s what we have:

  • Year over year November sales are down 25%
  • Annual sales are down 5%
  • Year over year November under contract is down 12%
  • Inventory is up by 5%
  • Sales in Corolla are down 12% overall this year

This is a dangerous combination.  With sales going down and inventory rising, it could certainly lead to another pricing correction for the market overall.

I get a lot of people asking why the Outer Banks market, specifically Duck and Corolla, has not recovered.  The primary reason is inventory.  Prices simply cannot rise when the market is carrying nearly 2 years of inventory.

I also want to offer a quick reminder of what typically happens in these cycles.  When we look at recorded history, it shows that these kinds of market cycles take 20 years from start to finish.  If we consider the main effects of the 2005 market crash started here in 2008.  That puts us only half way through.  There is nothing abnormal about this when nearly 100 years of history shows the same time frame through each experience.

I’ll tell you a quick story.  In 1988, a client bought a home in Sanderling for $345,000.  This was the top of the market for that time.  There had been a correction in 1986, yet didn’t affect the Outer Banks until 1988.  Shortly after his purchase, the market sharply corrected.  Ten years later, in 1998, I sold his home for the exact same price he paid.  Minus his selling expenses and various repairs, he did not come out ahead.  Fast forward to 2004, and that same home was offered nearly $600,000.  That’s how quickly things changed.

The point is, we are only half way through this cycle.  We are not experiencing the comeback of prices just yet.  It will happen again, as it always does, but it’s not likely to take place in less than 5 to 7 years from now.  That’s just how long these cycles take, and this one is particularly challenging due to the continued high inventory levels.

If you are thinking of selling, either have patience for another decade to pass, or go ahead and sell it now for what the market will allow.  Just remember, in another 10 years the home will be that much older and that much more maintenance required.

Nearly every day I speak to a seller who says, “We don’t HAVE to sell it.”  And yes, that’s true.  99% of the clients I work with are not in financial distress and truly don’t HAVE to sell it.  I encourage you to also ask this next question.  Just because you don’t HAVE to sell it, doesn’t mean that IT ISN’T the best financial move for you.  Really consider the big picture of keeping the home another 10 years, versus the disappointment of the price the market mandates at this time.  In the end, if you don’t HAVE to sell and don’t want to participate in today’s pricing, the truly best thing you can do is take the home OFF the market, which will help inventory levels go down.  That will help everyone in the long term.

As always, if I can be of further assistance to you, please reach out!

November 2018 Outer Banks Market Snapshot

What’s interesting about this time of year, is that we can really see the major trends going on in
the marketplace for the calendar year. I’m highlighting 3 specific points for this analysis.

Inventory
Inventory levels on the Outer Banks, specifically northern beaches, have been particularly
challenging for our market. The fact is, in Duck and Corolla, there are little to no primary sales
taking place. That is, no one is physically moving into or out of that area. Those kinds of sales
are crucial to market health because those people “HAVE” to buy and sell. The truth is, 100% of
the sales that take place in those areas are discretionary.

Nearly every seller we meet says the same thing…”We don’t have to sell.” Which is very true.
You don’t have to sell because you’re not making a physical move, nor are you in financial
distress. It’s important to recognize that 99.9% of sellers we work with, don’t HAVE to sell.
There’s a common misconception that pricing your home to sell in today’s market is the same
as discounting it to force it to sell. That’s simply not true. Today’s market in Duck and Corolla
simply has an oversupply of inventory and an under-supply of buyers. That’s the bottom line.
It’s a resort market where all sales are discretionary. Period. I encourage you to ask the
following question. Just because I don’t have to sell, does that mean keeping the home is in
the best financial interests of myself/family/long term plan? That’s what it really boils down
to. I know it’s difficult to swallow the prices today’s market requires, but consider the whole
picture before making a final decision.

The price in these kinds of markets are 100% dependent on the principle of supply and demand, because buyers don’t HAVE to buy until they find the home that ticks all the boxes for them.
Consider this in Corolla:
– Corolla has 294 homes currently for sale.
– 189 homes have sold so far this year; that’s 19 sales a month
– 19 buyers will buy each month and they have 294 to choose from
– 26 Oceanfront homes sold this year in Corolla
– That’s 2.6 buyers a month
– There are currently 53 oceanfront homes for sale in Corolla

Consider this in Duck:
– Duck has 128 homes currently for sale
– 104 homes have sold so far this year; that’s 10 sales a month
– 10 buyers will buy each month and they have 128 to choose from
– From $400,000 to $800,000 there are 52 homes currently for sale
– 47 have sold this year in that range; 4.7 buyers a month
– 4.7 buyers will buy each month and they have 52 to choose from

This is why inventory is the biggest indicator of value in the market right now. We have seen
major improvement in inventory levels over the last few years. This year, we are seeing that
inventory move back up, even just slightly. What does this mean? It means that appreciation is
not happening any time soon, and, that depreciation is still a very real possibility. I don’t report
this to be negative, just to be realistic. Waiting out the market is not a short term endeavor.
Bottom line…inventory is the single biggest challenge in the northern Outer Banks market.
Until that changes, your price won’t either.

Days on Market
The shining point of our market has been the amount of time it takes to get a home that is
priced right, sold. Priced right mostly means priced for its condition. Condition has become the
single greatest factor in a buyer’s decision. They will bypass location for an updated home
almost every time. For more information on the impacts of condition, click here.

The days on market number has gone DOWN again this year by another 20%. This is the third
year in a row this number has dropped by 20% or more.
What does this mean?
– Buyers are watching and waiting for the best value. They study the market for 18
months or more before making a decision to buy. When they see a home that is a good
value, they act quickly and with near full price.
– If your home is on the market for more than 118 days, buyers don’t consider it to be a
good value.

The real estate market is fluid. Pricing your home on one day based on the competition is only
as good as that competition stays the same. As homes sell and adjust their price, you have to
flow with it. In this kind of market, you can either lead with an aggressive price and sell, or,
follow the price others set for you as they sell. Why leave your pricing up to someone else’s
motivation?

Total Sales
Not only did the number of homes going under contract drop by 19% for October, the total
number of sales year over year is down by 10%. Blame the hurricane, the election, whatever
you like. It doesn’t change the facts.

Here’s the deal…interest rates are up, inventory is slightly up, sales are down by double digits.
I’m not telling you this to create panic. My job is to sell homes regardless of the market
conditions, which I have done for over 22 years. My job is also to keep you informed on the
trends, as they are happening. We don’t have a crystal ball, so statistics are the next best thing.

The Discretionary Nature of the OBX Market

NEEDS vs WANTS

  • Needs – UpDATES; maintenanceBalance Beam of Needs vs Wants
    items that increase attractiveness,
    peace of mind, and cause home to sell
    faster
  • Wants – UpGRADES that may
    increase VALUE AND make a home
    sell faster; appeal

 

Stop Sign

Remember, not all Upgrades make sense! Let’s talk before you spend –
sometimes money is better spent adjusting price vs. investing more in the
home.

March 2018 Outer Banks Market Update

Figures show that residential home sales for the Outer Banks are down 17% for February.  There were only 83 home sales, making that the weakest month of sales since November 2011.  So today I want to address the proverbial “elephant in the room” and what I consider the primary reason for the drop in sales.

First factor I addressed last month.  We were expecting this year to be flat, no substantial growth.  This is because markets are cyclical and historically speaking we have a flat year every 3 to 4 years.  This year just happens to be the time for it.

The second contributing factor continues to be the inventory level.  While we are moving in the right direction regarding inventory, we still have more homes for sale than buyers.

The interesting conundrum we experience, here on the Outer Banks, is the discretionary nature of buying and selling.  Most sellers I talk to say they don’t HAVE to sell.  It makes sense, as they aren’t physically moving OUT of the home.  Similarly, buyers are not physically moving INTO the home so, they too, don’t HAVE to buy and they are willing to wait for the right house.  There is no push for buyers to make a decision on a home that is not “turn key”.

So, what exactly does “turn-key” mean to a buyer?

  • Zero to minimal maintenance work required. This means the main systems of the home are in good repair and working order – ie.  the roof, windows, doors, siding, decking, paint, HVAC etc.
  • Upgraded, clean interior with the latest finishings (flooring, appliances, furniture etc.)
  • Well equipped for rental/summer season. This means well furnished, stocked and equipped for use by guests and owner with the best possible amenities.

Why do buyers want a home that is turn key?

  • They don’t want to manage a maintenance or renovation project from afar
  • Many don’t have the willingness to do any remodeling and upgrading
  • There are a lot of other choices available (remember the inventory) that are turn key
  • They want to be more than compensated for the “what if” scenarios that come up if handling maintenance issues
  • Financing is more challenging making it difficult to get the funding for repairs and/or upgrades
  • Cash after a large down payment to purchase is not as readily available
  • Probably the biggest reason is buyers are starting an exciting and new adventure with a beach house – they don’t want to feel they are starting out, already behind (ie. Having to do work to something they just paid a lot of money for)!

Why aren’t more Outer Banks homes turn key?  There are a lot of homes on the Outer Banks that have deferred maintenance and/or are outdated and this can be for a wide range of reasons.

  • Since this isn’t the primary home, owners aren’t seeing it every day and often aren’t aware of what needs to be done
  • No one else is telling them about things that need to be addressed
  • Most homes are owned for several decades and owners get to an age where it’s more difficult to do the work themselves
  • Finding and managing good contractors from a distance is a challenge, especially as owners age
  • Sellers have disengaged from the property – this happens for many, many reasons.

How can we best leverage this information? The key is understanding what makes a home more ATTRACTIVE versus more VALUABLE to a buyer.  This is where we see the connection between wants versus needs.

Basically, if the NEEDS of the house are updated and in good working order (aka, not original to an older home) the home is more ATTRACTIVE and will sell faster.

  • Needs are the things the house is already supposed to have – think the mechanical systems, building envelope, main components of what makes it a house
  • Buyers are already paying for these things and will not likely pay more for something the home is supposed to have in good working order. This is related to the maintenance work I mentioned above.
  • When you have these items in good shape this makes the home more ATTRACTIVE to a buyer, not necessarily more valuable.

The WANTS of the buyer in a house are the flashy upgrades a buyer is willing to pay more for.  Doing upgrades that make sense can potentially make the home more VALUABLE and help it sell faster.

  • Wants are the latest, greatest finishings and materials – think, granite counters in kitchen and bath, tile showers, hardwood or laminate flooring, composite/synthetic decking, fashionable décor
  • Upgrading doesn’t always make sense! It’s important to check with a professional agent for where best to spend money before selling.  Depending on the home, sometimes the money is better spent in adjusting the price over investing more into the home.

Bottom line…as I look through the list of homes sold this year, there is a common theme.  The majority of the homes that sold quickly and for the best pricing share some of the same words in the description:

  • New in 2017/2018
  • Updated recently
  • Completely remodeled
  • Upgrades galore!

Although this is the common theme, that doesn’t mean your home won’t sell without dumping a ton of money into it.  As I said before, it does not make sense to upgrade and update in every situation.  What I think it does identify is the need for proper pricing based on the condition of your home in relationship to the expectations of the buyers looking in today’s market.  These buying trends are not likely to go away, so if you’ve been thinking about selling, call a professional for advice on what, if anything, you can do before listing.  And keep in mind condition is a major factor in today’s market.  I hope this information has been helpful.  If I can answer any questions for you please reach out.

2017 Outer Banks Market Report

The buzz around town is that 2017 was a banner year for sales. So, is it true? The
answer is not a simple yes or no. There are many facets that impact a real estate
market.
The truth is, it depends on which side of the fence you’re on as to how you’ll measure the
market activity. Let’s look at the 5 ingredients of a market, in what I would consider
the order of importance:
1. Price – This of course, is the top concern for buyers and sellers. The
definition of a good market to a seller will usually come down to what
price they can get for their home.
2. Inventory – This is truly the one factor that can make or break a market.
Inventory controls price. We all know the principle of supply and
demand and how that impacts the value of a home.
3. Activity – The number of properties sold annually is a major factor and is
dependent on the previous two factors. If no one is buying, it keeps
inventory high and prices very low. We have two main markets on the
OBX (Duck and Corolla) where the sales that take place are 100%
discretionary. With no primary market forcing sales to take place, this is
keeping the inventory at high levels.
4. Interest Rate – Rising or falling interest rates impact the buyer’s
purchasing power. We are still experiencing very low rates, for now. All
signs point to some increase this year.
5. Buying Trends – This factor is the one least considered by sellers,
mistakenly. Especially in a resort market. Most sellers assume the
buyers are going through the same thought process they did when
buying. That simply isn’t true. Today, buyers place the most weight in
their decision on condition. After 20 years in the business, this is
definitely a shift in process.

So how did the Outer Banks fare in 2017 relative to each of these 5 categories?
1. Price in most locations has not changed. There is still no area with any
measurable appreciation and some areas (Duck and Corolla) are still
subject to some minor depreciation due to continued high inventory
levels.
2. Inventory is on the decline. In 2017 we had the lowest monthly inventory
levels since 2010. That is excellent news and a great sign of continued
recovery for our market.
3. Activity was up over 2016. Like any market we experience cycles. Any
time there is a double digit increase in sales, the next 3 to 4 years become
a little stagnant. That’s just how markets cycle. When you hear that the
OBX market was on fire last year, this is likely the aspect one was
referring to. This increase in activity really helped lower the Days on Market.                                 However, pricing for the market is the greatest contributor to that.

Year                    2012      2013      2014       2015       2016      2017
Total # Sold      2042      2093     2139      2292      2289      2560
Increase from
Previous Year    21%         2%        2%           7%         0%        11%

4. Interest Rates remained steady between 4% and 4.25%. Your guess is as
good as mine as far as what will happen with that this year. Stock market
gains are making it easier to diversify and invest in real estate.
5. More homes were passed up in 2017 because of outdated condition than
any other reason. If you want to sell quickly, you’ll either need to price
your home for it’s condition or invest in a few upgrades.

If you’d like more information on buying or selling this spring, contact me for more
information.

December 2017 OBX Market Update

Sales and Under Contract Properties


Our positive sales continue with single family residential sales units remaining up 14% YTD 2017 over 2016 and the corresponding dollar volume is up 17%.   

Residential land sales, YTD 2017 over 2016, are up 11% in units and up 3% in dollar volume.  The median sales price is up 1% year over year.

Inventory


Currently the market sits at about 10 months worth of residential inventory. This is a very encouraging sign and is a combination of strong sales and lower inventory levels.  It is EXTREMELY important to remember that this varies GREATLY by area and town.  We still have some areas that are not experiencing these results.  It is important to understand what the number is for your area.

New inventory that came on the market in November was up 2% from November 2016.  

Average days on market for SOLD single family residential YTD 2017 is 152, down from 208 days in 2016!  Average days on market for all current active single family residential listings remains at 215 days. 

Distressed residential properties comprise 6% of sales YTD which is flat to 2016.  Distressed listings currently comprise only 1.5% of active inventory.

Pricing

Single family residential median sale price YTD 2017 is $323,000, which is up 3% over the year prior.

This data here represents the percentage of total homes sold in each respective year relative to the sales price range. When we see an increase in median price, it can sometimes be just more sales occurring in one price range versus an actual increase in price. I think for 2017, both are actually true. We did see actual appreciation in two markets. Kill Devil Hills Between the Highways as well as Kill Devil Hills Westside.

 Price Category                     YTD 2016      YTD 2017
Below $199,999                               14%                  13%
$200,000 – $499,999                    68%                 66%
$500,000 – $749,999                     11%                  14%
$750,000 – $999,999                      4%                   4%

$1,000,000 and up                           4%                   4%

AreaMedian Price% Change YTD       

2017 to 2016

Units Sold %

Change YTD           

2017 to 2016

Corolla$476,250+12%+5%
Duck$465,500+6%+30%
Southern Shores$422,500+6%+23%
Kitty Hawk$307,500–%+3%
Colington$252,500+8%+9%
Kill Devil Hills$275,750+4%+5%
Nags Head$380,000-1%+20%
Hatteras Island$300,000+12%+12%
Roanoke Island$281,880+7%-10%

 

September 2017 OBX Market Update

We had a mild August for weather, not for real estate sales.  With interest rates still very low and activity increasing, we fully expect a great fall market.

Here are the main highlights:

  • Condition – Buyers are becoming more and more selective about the condition of the homes they buy. Their expectation is to have the updates and upgrades already done.  Updates = recent roof, windows, doors, siding, paint, HVAC.  Upgrades include granite counters, stainless appliances, tile or hardwood floors, cabinets in kitchen and bath.  It’s clear, do the updates/upgrades or drop the price.
  • Homes listed and sold since January 2017 are going in only 45 days. Many with multiple offers.  Buyers have been watching the market for years.  They know when a house comes on the market at the right price and they are ready to act.
  • Residential inventory is down by 8%. This is a nice continuation of what is needed to stabilize the market in Duck and Corolla.  Because those areas are primarily second homes, the inventory has been stuck very high.  That has been putting more pressure on lowering prices.  We are slowly getting there, yet still a year or two away.
  • Distress sales made up 2% of all sales for our local market. That makes these sales a complete non-issue as that is a normal amount for any market.
  • So far this year 18 more homes have sold in Corolla than last year (an increase of 10%). In Duck there were 34 more homes sold this year, up 38%.  Overall the entire market is up by 11% (1310 homes sold 2017 vs 1176 in 2016)

If you have any questions about buying or selling on the Outer Banks, please contact me.