July OBX Market Stats

While there isn’t much change to report this month, I predict by October/November there will be more inventory and the beginning of a quantifiable shift in pricing. You know I’ll keep you posted! To see the full effect of the logarithmic path, I’m comparing January 2024 to July 2024.

Jan 2024 Jul 2024
Months of Inventory 4.8 5.9
Active Homes 492 700
% Under Contract 24% 21%
Price Changes/Month 171 232

 

image of OBX Market Cycles

2024 Second Half of the Year Weird Market Selling Strategy

As we approach the second half of the year, it’s important to notice the little shifts happening along the way.  Remember, real estate markets don’t crash overnight.  It happens slowly at first, then all of a sudden.  We are in the slowly at first phase.

Our market here gets insulated because it’s not a primary market.  Being a discretionary sale and discretionary purchase for the majority of transactions, it provides a lag time from when we start to see primary markets destabilize.

If you are thinking about what to do with your OBX investment home, you need to look big picture.  Consider first and foremost, just because you don’t HAVE to sell, does not automatically mean that keeping the home is in the best financial interest for your family.  Always consult your financial adviser for guidance.

Let’s now take a look at the two options, sell or keep.  Regardless of what you choose, this information will help you set up the best expectations for either choice.

Sell

  • Good news! Prices are still at record highs.  You have not missed the boat.
  • However, pricing strategy must remain fluid. No longer set the price and then 3 months later look at it.  If you want to maximize profit here, you must be the trend setter, not the follower.
  • Inventory is rising – up 29% from this time last year
  • Demand is dropping – down almost 10% from last year, and last year demand dropped 50% from 2022
  • Price reductions are increasing – in May 368 new listings came on and 287 listings had a price reduction
  • Must be negotiable – 66% of properties sold are below asking price.
  • Affordability is still the number one concern for buyers

If you employ a listing strategy with this in mind, you will maximize your return and get the home sold in a reasonable amount of time.

Keep

  • Remember how these cycles have worked over the years.
    • Boom 1985/86 – fell apart early 90’s – stagnant until 2000.
    • Boom again 2004/05 – fell apart 2008/09 stagnant until 2019/20.
    • Boom 2021/22 – 2023 activity dropped by half, pricing is just starting to crack with price reductions and under asking price sales.
    • If the pattern continues it could be stagnant again until 2035 or longer.
  • Rising Insurance as well as other increasing vendor costs.
    • be prepared for at least a 14% increase in dwelling policies and unknown yet for homeowners.
    • Service providers are increasing costs: lawn care, pool/hot tub maintenance, linens, etc
  • Return to pre-pandemic rental income.
    • It starts with lower vacancy rates. 2024 is already seeing only 90% booking.
    • Next will be set lower rates – discounts are already happening.
    • If you stay, the cost to own will go up, with income to support going down.
  • Prepare for capital improvements.
    • Tightening insurance underwriting regulations are requiring updates to stay insured. Roof, water heater, etc
    • Continued lack of demand for homes that have not been updated. Especially as inventory increases, you’ll need to have prime condition and updating to be chosen.
    • Reality of a major storm this year or next. Let’s face it, no one likes to say it, but we haven’t had a hurricane since 2018.  Generally, we see a 6 to 9 year pattern.

If you do decide to keep the home through the next cycle, let’s at least put together a plan to get your home updated and where to best spend the money.  I also have a list of trusted vendors who can help you get things done.

Now that you have the big picture, let me know if I can be of any help as we navigate this next market shift.

May OBX Market Update

May OBX Market UpdateIn a nutshell, the market here is changing…slowly…but surely.  These types of cycle shifts don’t happen all at once.  Fortunately, because I study the market every day, I can help you see it coming.  After all, you can get out of the way of what you don’t see!

Here are the basics we are watching:

Inventory

Total Everything – up 27% since January (currently over 1,000 listings)

           Homes, Single Family and Condos/Townhomes – up 24%

Activity

Absorption Rate has gone from 4.8 months to 5.5 months since January

This means it would take longer to sell the homes we currently have on the market.  Once this goes over 6 months, we enter a Slow Market

Price

53.5% of homes are still selling within 0-30 days, of those…

97% of asking price is what they are selling for

67% of homes are now selling under asking price

Basic supply and demand economics tell us that when supply is inching up, demand is inching down that prices will start to waiver.  How long will this current market last?  We just have to keep watching. We are noticing more price reductions coming in and fewer multiple offers.  This is an active situation.  Stay tuned for next month’s report!

If you have thought about buying or selling, let me know so we can plan your strategy.

First Quarter 2024 Comparison to First Quarter 2023

OBX Real Estate Market - Crystal Ball and upward graphWhat a difference a year makes!  Long story short, there are some BIG moves that are happening.  I’ve talked before about algorithmic decay.  This chart here is exactly that!  Little, by little, by little, then bang.  That’s how markets change.  Tale as old as time, song as old as rhyme, it’s almost as good as a crystal ball.

Anyone saying the real estate market on the Outer Banks is not changing is just not paying attention.

But, look here, and you decide:

Image of the differences between 2023 and 2024 in the OBX Real Estate Market

We are on the cusp of a price shift potentially starting this fall.  Here are the facts about our market:

  • Insurance costs are rising and coverage dropping
  • Interest rates are not changing any time soon
  • Rental income is back to pre-pandemic levels

If you are on the fence about selling your home, your window is closing before we start to see quantifiable price shifts.  Call me today to discuss the best strategy for selling in today’s changing market.

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.