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Happy March!
What 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
Mid Currituck Bridge
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
Outer Banks Market Update – March 2023
As of right now, the Outer Banks is experiencing what is considered to be a “normal market”. That means we are not seeing prices change in any significant way up or down. While prices are still at what is considered to be somewhat inflated, there’s not been real measurable changes so far. Secondly, we still have a balanced level of inventory. A normal market is considered to be a demand level of 4 to 6 months of inventory. We are sitting right in the middle at 5 months of inventory. This means the demand is steady and supply is still rather low. In comparison at the peak times in 2021 and 2022, we had just a 2-month inventory.
This begs the question, where are we headed? There are 3 factors I’m watching to help determine that. What’s great about Beach Realty is we watch the statistics every single week. It’s just as good as having a crystal ball. The numbers change in a gradual way that you can actually see the shifts coming if you’re paying attention, which we are!
Factor 1 – Mortgage Applications
Year over year nationwide mortgage applications to buy a home has fallen 41%. In just a YEAR! It’s currently at the lowest level in 28 years right now. That’s even worse than the mortgage crash that happened in 2008. Coupled with data from NAR, only 29% of recent home purchases are cash. The most obvious cause is rising interest rates and still inflated home prices. As a second home market, over 70% of our home sales are a discretionary purchase. It’s a decision buyers can wait on, especially if they think changes are coming soon.
Factor 2 – FNMA and Second Homes
About a year ago Fannie Mae basically got out of the second home business. Wanting to pull support from second homes and focus more on first time home buyer programs they negotiated a deal with the Mortgage Bankers Association to drastically increase rates on second homes. Which at the time didn’t seem too objectionable on conforming loans because the conforming loan limit was $548,250. With the average second home here being near $700,000, most buyers wouldn’t be affected. Now the limit is $726,200 for a conforming loan, coupled with the most attractive rates being a now 75% LTV, the rates shot up over 7% with one point. Making it even more expensive than ever to buy a home on the Outer Banks with a conforming limit mortgage. I don’t know the exact percentage of second home mortgages that are sold to Fannie Mae, but I think an educated guess would be MOST of them. The only solution is for mortgage brokers to keep the loans on their books and try to offer more attractive rates. Who knows how long that will last and how many lenders will participate. I only know of one broker with that program right now.
Factor 3 – Rising Inventory
As buyer demand continues to soften due to rates and prices, inventory will start to creep up this spring and summer. That could lead us directly into an inventory level over 6 or 7 months by fall. That pushes us back into a buyer’s market. If rental receipts drop this year, as expected, this fall we could see prices take a very noticeable hit. How much is yet to be determined. However, with as high as prices rose over the last few years, even a 10% drop would likely still put the home higher than pricing was in 2019. So all is not lost, for this year at least.
If you’re thinking about selling, NOW is your window. Give me a call to discuss further.
Happy New Year from the OBX
Hello and Happy New Year!
What an interesting few years in the real estate world, and the world in general! I got to spend a good bit of time with my niece and nephew over the last 18 months and do a little bit of traveling. After 26 years in the business, I was so grateful and fortunate to have the opportunity to still assist some new and past clients while enjoying that precious time with family!2023 Outer Banks Market Predictions
After a few years of a WILD RIDE, things are finally starting to stabilize here at the beach. A normal market (no real swing in value up or down) is defined by an inventory of 4 to 6 months. We are currently just under a 5-month inventory, putting us smack in the middle of that range. With this as our starting point, where might we be headed?
Pricing – Currently, pricing still feels on the high end. The 15 buyer deep multiple offer scenarios are long gone, but we haven’t quite seen a sharp change in pricing just yet. However, would you be surprised to know that even in the thickest part of the frenzy, still, 50% of all properties sold were for LESS than the asking price? Below is a comparison of what the market did in January of 2022, fast forward to November, and then the average for the entire year of 2022.
2022 Closings Jan % Nov % YTD%
Full Price 23.86% 22.05% 23.90%
Over List Price 21.05% 15.90% 25.54%
Under List Price 55.09% 62.05% 50.55%
PREDICTION #1 – 2023 by year’s end we will move to 80% of homes will sell for less than list price.
Activity – As I mentioned in the email, we are already seeing a 52% drop in the number of properties under contract as well as 50% drop in the number of sold from this same time last year. Under contract percentage of inventory hit a peak of 48% and is now down to 26%. So activity has SHARPLY moved downward. An inventory bump of only 10% would push us over a 6 month supply and that is when we will likely see a major effect in pricing.
PREDICTION #2 – By June/July, the inventory will peak to a 7 or 8 month supply and pricing will start to be greatly affected.
Rentals – With the airline industry crippled in personnel shortages, among other things, including cost, our rental season will continue to be very strong this year. People will prefer driving destinations over flights. Our own rental numbers continue to show a steady growth patter for 2023.
PREDICTION #3 – If you do desire to buy or sell, rental income will remain a good investment strategy.
Interest Rates – We are seeing rates right around 7% for conforming, unless you choose the ARM option for either 7 or 10 years depending on the lender. Banks right now are showing more favorable terms because they are able to designate more money to shelf these loans long term. We know the FED wants to slow the interest rate increases, but with the recent $1.7 Trillion bill passed, it’s unclear how they will do that.
PREDICTION#4 – It looks like rates will hover in the 6.5% to 7.5% range. If you want to take a chance on an ARM, that can get you lower.
Buyers – It’s no secret that the market is mid-cycle. All the economic factors are present. So if you want to sell your home in 2023, before things cycle back down, it’s important to understand the current buyer mindset. Fewer buyers are in the marketplace, and as inventory goes up, it will start to push prices down. However, I still believe real estate to be one of the best investments to make in an uncertain economy. Why? The value of the dollar is ever decreasing. Real Estate is a tangible asset. It has value beyond the “sales price”. It can generate passive income, be used personally, create some tax benefits, etc. I’m not worried about being able to find a buyer for your home. What I do know is that financial experts will advise buyers to pay less in anticipation of a pricing adjustment. This only means you have to truly strategize all aspects of the sale, not just price.
PREDICTION#5 – Condition, price, seller concessions for buying down points, lower due diligence offerings, staging the home, will become even more valuable negotiation points than we have seen in the last 2 years.
I’m personally excited for the market in 2023. This is when truly skilled agents get to shine! Negotiation skills and strategy will be more important, and so will having a professional on your side. If you have any questions about buying or selling, reach out!
March 2022 Market Update
Let’s talk about INVENTORY. Most people don’t realize that inventory level is the key determining factor for real estate prices. If I had a dollar for every time someone asked about the bridge in relationship to values, I would have a whole lot of dollars! And yes, there are a lot of factors that play into value.
For example:
- Condition – buyers today don’t want to fix old problems
- Location – location has always been top of the list
- Rentability – Not every buyer in our market cares about this, but it does help
- Financing – Being able to get good terms
- Insurance – Getting the best premiums makes the home more saleable
However, inventory levels trump all other factors when determining value. Just 3 short years ago the inventory levels in Corolla were over 2 years. Now, it’s barely one month. The old faithful supply and demand is king when it comes to prices going up or down.
Let’s also realize these cycles historically (nearly 100 years worth of data) last for 20 years. The last cycle began in 2000. So regardless of COVID, we were due for an up market. I do believe that COVID accelerated what should have taken 3 years to get where we are into 2 years. That being said, the last up cycle lasted for 5 or 6 years. It’s not clear how long this one will last. Especially with everything going on, who knows.
What we do know is that watching the stats is the same as having a crystal ball. Nothing can change until inventory levels change. That doesn’t look to move any time soon. We are just beginning the spring market where our inventory usually increases by 30%.
Here’s the number of homes currently for sale and under contract for each area.
Area For Sale Under Contract
Corolla – 22 86
4 Wheel – 8 8
Duck – 13 23
Southern Sh 10 16
Kitty Hawk 9 8
KDH 12 53
Nags Head 12 26
These numbers still blow my mind! We all want to know what’s going to happen. Here’s what we can count on, what goes up, must come down. The big question is WHEN? My answer, watch the inventory and you’ll know. When we get back to 4 to 6 months, that’s when it will start.
Meanwhile, if you have any questions about buying or selling in this crazy market, give me a call!
May OBX Update
We love having you here!
I’ve got 3 updates to share this month:
5 Reasons To List Your Home in the Summer
Although it sounds reasonable to think with all the guests coming, it would be better to just sell the home in the fall or spring, take a look at these 5 reasons you could be missing out by waiting.
- Inventory has been our biggest challenge in terms of pricing. June, July, and August are historically the time of year when our inventory is the lowest. Why not take advantage of that incredible opportunity? Lower inventory could mean higher prices.
- The Outer Banks will have over 3 million visitors each year. Obviously, the majority of those folks visit during the summer months. We cannot get that kind of exposure any other time of year!
- The home is fully open and operational. Buyers will have inspections done before closing. When the house is winterized during the fall/winter there are extra costs to open the house back up for those inspections. Right now, everything is up and running and easy to inspect and ensure to the buyer the home is in good condition.
- It’s a beach house! When does the beach look the best? Summertime of course. Your beach house will show the best with sun shining, deck chairs out, pool open, hot tub running! Buyers get excited about these things and it helps to sell your home.
- Buyers this time of year are serious about buying! If a potential buyer is going to take time out of their much-anticipated vacation to look at your home, it means they are serious about buying. They’re here with all decision-makers too.
April Newsletter
Happy April! I hope you had a wonderful Easter weekend. Beautiful weather has finally arrived at the beach.
I have a few interesting topics this month.
For the rest of the changes, click here to read the full article.
