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.

December OBX Update

Outer Banks a Year in Review

The insanity of the Outer Banks market continues.  The almost full-year snapshot reveals some interesting things for sure!

Below, you’ll find each town broken down for SINGLE FAMILY HOME sales from January 1st to November 30th.

Area 2023 Sales Median Price 2022 Sales Median Price %Diff
Corolla 197 $930,000 310 $895,000 36%
Duck 60 $1,087,500 99 $1,050,000 39%
SShores 74 $743,000 105 $780,000 29.50%
Kitty Hawk 53 $690,000 91 $659,000 41%
KDH 167 $549,000 270 $530,000 38%
Nags Head 120 $712,000 174 $799,000 31%

The strangest thing I’ve ever seen is a decreased demand by this much and ZERO effect on pricing.  The only thing that is keeping it afloat is the continued lower inventory.  If next spring we get the typical 30% spike in inventory and demand stays low or lower, you can expect falling prices almost immediately.

Area Active 30% Increase New Active #Months Inventory
Corolla 88 26 114 6 months
Duck 21 6 27 5 months
SShores 17 5 22 4 months
Kitty Hawk 18 5 23 5 months
KDH 60 18 78 5 months
Nags Head 40 12 52 5 months

As you can see, it won’t take many listings in each market to push the inventory to 5 or 6 months.  And this is based on current demand numbers.  If demand weakens more, it could push the absorption rate higher, creating even weaker conditions.  Only time will tell, but we’ll be watching!

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.

For Last 90 days of 2023

What to expect?  Well, short of some financial event or credit crisis, probably more of the same.  The big challenge with resort markets, aka discretionary markets, is the lag time.  It generally takes about 18 months for economic factors in the real world to make their way to us.

Because we don’t have a large section of properties that “have to sell” to keep our market moving, as soon as buyers slow down, inventory piles up.  At least that’s how it normally is.  Truthfully, we are not that far from inventory pushing that market shift from “normal” to “soft.”

That being said, right now here are the main highlights of our current market for Single Family Homes.

Corolla, Duck, Southern Shores           
KDH, Kitty Hawk, Nags Head
Active – 110 Active – 110
Under Contract – 52 Under Contract – 44
Sold – 274 (30 buyers/month) Sold – 289 (32 buyers/month)
Absorption Rate – 3.6 months Absorption Rate – 3.4 months

I double-checkedhose numbers, and it is such a coincidence to have the same active for both north and south markets!  They are shockingly similar in all categories.

With 30 buyers a month, 180 active would make it a 6-month absorption rate.  That’s only 70 more listings to push us into a soft/declining market.  I don’t think it’s unrealistic to suggest we could be there by spring.

Real estate is long term investment.  You can time it right, or you can hold and enjoy.  If you have questions on what is the best strategy for you, call for an appointment.

Beat the Rates!

There are two possible ways to get the best rate possible, even with Fannie Mae sticking it to second home buyers!

The first is a 2 part mortgage. 

One lender, Drew Wright has a program at FNB where you do a 60% first mortgage at an incentive rate similar to that of a first home buyer, and then a second mortgage (home equity loan) of 20% at an even lower rate, with a 15-year amortization.

What he found with his calculations is not only a cost savings on interest but also an increased equity position due to the 15-year amortization.  Click here for a quick recorded message about the process/savings or email me and I’ll forward to you a written version.

The second option is a delayed financing program.

In this scenario, the buyer pays cash for the property, which can potentially save you money in initial negotiations, and then within 6 months of closing you cash out with this loan.  Because it’s not considered a new purchase, they are offering advantaged rates.  And it allows for a 30-year amortization, which a home equity does not.

Either way, if you want to invest in a beach home now, here are two great ways to save some money!  Call me to set an appointment and discuss a strategy that works for you!

The “Raw Truth” about the OBX market right now.

It’s no secret the real estate market is in very bad shape right now.  And in an effort to be as up-front as possible about the pros and cons, I wanted to create this quick list of the main things to consider before buying or selling.

One of the biggest questions I get as an agent is around timing.  When is the right time to buy or to sell?  Truthfully, there is not a one-size-fits-all answer to this.  The best time is when you want to.  Rarely do we have clients who HAVE to buy or sell out of some distress.  That’s just not the norm.  So, does it make sense for YOU to buy or sell right now?  Let’s look at the raw truth.

  1. Outer Banks homes have the ability to generate quite a nice rental income. If you want to insure your long-term capability to own the home, only look at homes with income that is enough to cover the mortgage.  If it’s not going to cover at least that part, it may not be the right house for you.
  2. OBX home purchases are primarily a lifestyle choice. It’s not the norm to make bank on rental income, so only buy a home you know you will get a lot of personal use from.  If it’s not really ideal for your family, you won’t use it.  That time spent is priceless.  Be sure it fits your future family, too.
  3. With banks failing as what seems to be a regular occurrence now, real estate is an actual tangible asset. While the prices do fluctuate, it will never go to zero.  The inflationary dollar is in real trouble.  Why not park some cash in real estate, especially with passive income and personal use on the table?
  4. However, real estate appreciation or value is NOT capable of instant liquidity. Unless you consider 30 days instant.  Pulling liquidity out of real estate takes some financial investment and, most importantly, time.  If you need liquid cash fast, this is not the right investment.
  5. MAINTENANCE IS MANDATORY. Let me say that again.    Do not become one of those lax owners who collects the money and does nothing to the house for 20 years.  It will only cost more later.  The environment here is harsh.  Annual maintenance to keep the home in top condition is expensive.  Be prepared for that, or just buy raw land instead.
  6. While we benefit from low taxes here, insurance is most definitely on the rise! It may soon be unaffordable for many.  And, there is talk of no longer offering coverage for natural disasters.  I can’t imagine they get away with that, but be aware it’s being talked about. To be properly insured could be pushing $15,000 for many homes these days.  It’s nothing to take lightly.  Make sure you aren’t currently under-insured.  Construction costs for a new build START at $300/sq.ft. now!  (I hope you were sitting when you read that)
  7. Interest rates aren’t forever; you can refinance! Granted, you will need equity in the home to do that, so be aware it does come with some risk if that is your plan.  You will need to refinance before the market price eats up your 20% down payment, or it will require more cash to make it happen.
  8. As a Long-term investment plan, real estate is actually very low risk – high reward. Even if someone bought in the last boom of 2005, just 16 years later, even they would have made a handsome profit.  Not to mention 15 or 20 years of someone else paying your mortgage…all that equity for you to capitalize on at the end.

If you would like to discuss your specific circumstances and find out the best timing to either buy or sell, just contact me and we will go through everything you need to know!

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].