Hatteras Island Real Estate Blog

The impact of Hurricane Irene on the island’s real estate market is the wild card at the present time, the effect of which will only be known in hindsight. However, if the experiences of other areas of the country that have had to deal with natural disasters such as earthquakes and hurricanes are somewhat valid indicators, there is reason to be optimistic that any negative effects from the storm will be short- lived. Even with the island being temporarily accessible only by ferry, properties are being placed under contract and sold.

At the time Hurricane Irene arrived on the island, the real estate market on Hatteras Island was playing out fairly closely to what we expected – that it would look a lot like last year. The market for residential properties appears to have stabilized, and we are hopeful that 2011 will be the year that the unimproved lot market turns the corner.  As near as we can measure it, we marked the beginning of the buyers’ market for residential properties in June 2005, and the market for unimproved lots peaked in 2006.  It probably ended in 2009 for residential properties, but we are still waiting to see if the lot market has reached its cyclical low point. 

 Here is a summary of key residential market indicators through August of this year compared to first eight months in 2010.

 # FOR SALE  -22.8%
# SALES  +14.7%
AVERAGE SALE PRICE  -5.5%
DOLLAR VALUE OF SALES  +8.5%
# UNDER CONTRACT  -17.1%
BUILDING PERMITS  +5.3%
# FORECLOSURE FILINGS  -6.9%
# FORECLOSURE SALES  +72.0%
# SHORT SALES  +53.8%
INTEREST RATES   -0.6%

Prior to the storm, we were starting to see a noticeable improvement in some performance indicators such as the number of sales and relatively steady home prices.  Because of the persistent overhang of distressed properties, our sense is that we can expect to experience more sales at flat to slowly improving prices for the foreseeable future. All things considered, we are looking forward to a consistently improving market over the next few years, but nothing like a repeat of the boom years from 2001 to 2005.

If the secret to successful investing is buying low and selling high, then now is a great time to buy on Hatteras Island as we come off the bottom of the recent buyers’ market. Residential prices are down about 40% from their peak six years ago, and there is an attractive variety of properties from which to choose. Lot prices are even more eye-catching.

We would consider it a privilege to help you make your dream of owning a cottage or home site on the island a reality. We may be reached by phone at 252.305.1556 or by e-mail at hranicka@hatterasisland.com. Just let us know what type of property you are seeking, and we will keep you informed about available homes and lots.

An important part of the American dream for many families is owning a cottage by the sea. We are sure there are many reasons for this dream, but we think its most basic roots can be found in our childhood memories of carefree days spent at the beach with those we loved – experiences that we would like to recreate for our children and for ourselves. The good news is that there probably couldn’t be a better time to make this dream come true.

It is no secret that real estate is a cyclical business.  There are times when market forces favor the sellers of properties and other times when circumstances favor buyers. Since the summer of 2005, we have been in a buyer’s market on Hatteras Island.  This has created an environment that makes it an opportune time for anyone thinking about purchasing a cottage or lot to turn their thoughts into action. Let’s take a look at some of the main reasons that real estate market conditions on the island are so favorable for buyers.

1.  There is a wide selection of properties from which to choose. 
2.  The purchasing environment for buyers is less stressful with fewer buyers looking.
3.  Property prices have significantly declined.  
4.  Properties can be expected to cost more in the future as prices and interest rates rise.
5.  Distressed properties represent new opportunities in the real estate market.
6.  Interest rates are at historically low levels but are increasing.
7.  Rental income can help offset the expenses of ownership. 
8.  The demographics for resort markets are very strong.
9.  The Outer Banks economy is forecast to grow in the years ahead. 

As we consider the factors that make this such a good time to be buying a place at the beach, let’s never forget those things that make Hatteras Island so special and that keep a firm grip on our thoughts, regardless of how far away we may travel.  Whether it is the windswept sand dunes, the crashing surf, or the unspoiled beauty of an island where 70 percent of the land is held in public trust, there is something that captures our imaginations and causes all of us to want to make Hatteras Island a more permanent part of our lives.

Contact us by e-mail at hranicka@hatterasisland.com if we may help you with any of your Hatteras Island real estate needs. You may also enjoy following us on Facebook at http://facebook.com/HatterasRealEstate or on Twitter at http://twitter.com/fromhatteras.

When built in 1963, the Bonner Bridge over Oregon Inlet had a life expectancy of 30 years.  Efforts to replace this vital link to Hatteras Island have now been going on since 1993 for an unbelievable 17 years! A seemingly never-ending series of studies, environmental issues, and administrative delays have repeatedly held up construction. Details concerning the bridge and the actions that have been taken to get it replaced my be viewed at -  http://www.replacethebridgenow.com.

At this point, we appear to be very close to getting a decision to move ahead with the start of construction. The North Carolina Department of Transportation (NCDOT) has prepared an Environmental Assessment with a preferred alternative that recommends building a new parallel bridge next to the existing structure as quickly as possible.

The changes outlined in the new Environmental Assessment include:  

• Eliminating the Pamlico Sound Bridge alternative, known as the “Long Bridge”
• Reducing the impact on the Chicamacomico Life Saving Station & the Rodanthe Historic District
• Modifying the location where the new bridge will connect to Hatteras Island
• Recommending a new preferred alternative known as the “Parallel Bridge with N.C. 12 Transportation Management Plan.”  It calls for the new Oregon Inlet Bridge to be built as soon as possible while information generated by a coastal monitoring program would determine what to build along NC Highway 12 in future phases as circumstances warranted.

This is a decisive point for the future of the Bonner Bridge.  You can make a difference by providing your comments in support of the new bridge to the North Carolina Department of Transportation. The Replace the Bridge Now Committee is requesting that all property owners, visitors, and those with an interest in Hatteras Island contact the NCDOT, and let them know that the proposed bridge has been studied enough. No more studies are necessary; now is the time for action! The committee also thinks it would have a meaningful impact if your comments described what the bridge means to you and how and why the bridge is a lifeline for the island.

Recognizing that everyone is very busy, the Committee has drafted a pre-printed public comment form that you can submit by e-mail. The form may be accessed by clicking on the following link – http://tinyurl.com/35dx995.

We urge you to support this effort and get as many as your friends and family as possible who visit Hatteras Island to do the same.  Without the bridge our safety, our livelihoods, and our property values would be severely compromised.

Thanks in advance for you involvement in this very important matter.

With the summer season officially starting this month, we thought it might be interesting to check the status of the island’s real estate market.  We are pleased to report that residential sales have been significantly higher (+47.2%) during the first five months of this year compared to the same period in 2009. In addition, the average selling price has remained essentially unchanged  (-0.4%).  The average residential selling price from January through May this year was $370,538. Both of these statistics lead to the cautious conclusion that the real estate market on Hatteras Island looks like it is on the road to recovery.

We were also curious to see how the selling prices of cottages in various locations have changed during the buyer’s market that we have experienced over the past five years.  Oceanfront property prices have been hit the hardest, while soundfront have held their values the best.  The following table shows the changes that have occurred in average residential selling prices between January – May 2005 and January – May 2010.

 AVERAGE RESIDENTIAL SELLING PRICES

DIstressed properties represented close to 50 percent of residential sales in both the first five months of 2009 and 2010. While the number of foreclosed properties that were sold decreased slightly, the number short sales dramatically increased from 3 in 2009 to 17 this year. Our sense is that this increase reflects a growing awareness among sellers that short sales are a viable alternative to foreclosure, and a higher comfort level among real estate brokers with the details of the short sale process.

The practical implications of these numbers are twofold – those properties that are priced to reflect current market conditions will be the most likely to sell, and, it’s a great time to buy on Hatteras Island while we are still in the very early stages of recovery.

Whether your interest is in selling a property that you own or in purchasing a home or lot, we are available to personally assist you or someone you know. Our experience and expertise can help you to interpret market trends, and we will guide you through every step of a transaction. We may be reached by e-mail at hranicka@hatterasisland.com or by phone at 252.305.1556.

This post is an update of information concerning the proposed wind turbine pilot project in Pamlico Sound and the significantly larger potential wind turbine farm that could ultimately be built. These projects are important to Hatteras Island residents and visitors for several reasons, some financial and others that relate to the quality of life on the island.

As a vehicle for simplifying a wide array of issues related to the project, we have prepared the following outline for your consideration:

• Tourism is the lifeblood of Hatteras Island’s economy.

• The primary natural resources of Hatteras Island that are the basis for its attractiveness as a tourist destination are its pristine beaches and the panoramic, unspoiled views of the Atlantic Ocean and the Pamlico Sound that visitors and residents enjoy.

• While there can be factual and honest disagreements about the various impacts that the Pamlico Sound wind turbine project may have on the island and the environment, it is indisputable and unanimously agreed by everyone, including the developer, that the wind turbines will be visible from the soundside shorelines of Avon, Buxton, Frisco, and Hatteras Village. The turbines will be visible both during the day and at night when they can be expected to be illuminated with hazard warning lights.

• Because the presence of the wind turbines in the Pamlico sound could affect the purchasing decisions of buyers, the North Carolina Real Estate Commission’s legal department has expressed the opinion that both the pilot project and the potential ultimate project are material facts that must be disclosed to all prospective buyers of soundfront and soundview properties in the villages of Avon, Buxton, Frisco, and Hatteras Village that could be impacted by the projects.

• From the standpoint of soundfront and soundview property owners, as well as the island’s real estate industry, it can be anticipated that the real and potential visual impact of the wind turbines in the Sound will make properties with a probable view of the turbines more difficult to sell to some prospective buyers. Any difficulty in selling these properties can be expected to be reflected in lower listing prices, lower selling prices, and ultimately, lower property values.

• The impact of the initial pilot project of 1 to 3 wind turbines covering an area of approximately 3 square miles of the Sound can be expected to be minimal. However, the impact of the built-out project of up to 138 wind turbines, each 429 to 498 feet high, spread over a 25 square mile area of the Sound will be massive. It is our personal opinion that the pilot project is a red herring designed to shift the focus of attention away from the more controversial large scale ultimate project.

• The de facto creation of an industrial zone in the waters of the Pamlico Sound adjacent to Hatteras Island by Duke Energy with the backing of state officials is unprecedented. As the approval process progresses, there will be public hearings on the project(s). As affected stakeholders, it seems reasonable to conclude that each of us needs to be informed about the project(s), determine what our position will be, and participate in the decision-making process.

• Last month, the U.S. Army Corps of Engineers (USACE) held a “scoping” meeting at the Dare County Justice Center in Manteo. The purpose of the meeting was to gather input on issues and concerns that the public and various stakeholders thought should be addressed in the Environmental Impact Statement (EIS) that the Corps is requiring Duke Energy to complete as part of the permitting process for the Pamlico Sound wind turbine pilot project. A list of almost 100 issues concerning the project that were raised at the meeting can be viewed on the Corps of Engineers link listed in the next bullet point.

• Detailed information about the Pamlico Sound wind turbine project may be found online at – http://www.climate.unc.edu/coastal-wind and at  the Corps of Engineers web site.

The question that everyone wants answered is what will the turbines look like from shore? The environmental consulting firm working with Duke Energy and the Corps of Engineers has developed artists’ renderings of what the pilot project might look like from Avon Harbor, Buxton near the Sandbar restaurant, and Frisco across from the pier. We have not been able to get jpeg photos of these renderings, but we will display them as soon as we can track them down.

We are certainly not experts on any of this. We have simply been following the project closely, reading as much as we can, and attending the meetings. Our purpose in bringing this information to your attention is our concern that there were very few Hatteras Island residents at the U.S. Army Corps of Engineers meeting last month in Manteo. We believe that each of us, residents and visitors alike, has a vested interest in the outcome of this project from the standpoint of the potential impact on our island economy as well as the potential impact on the island’s natural resources (the unspoiled views across Pamlico Sound) that we all enjoy.

The core question is who is looking out for the interests of Hatteras Island as this project moves forward?

Recognizing that the first quarter is usually one of the slowest times of the year in the annual cycle of the Hatteras Island real estate market, it is encouraging to see that 2010 is off to a good start. While the final first quarter numbers for this year will not be available for a few weeks, the preliminary sales data for both residential properties and unimproved lots are well ahead of results for the first three months of last year.

If you recall, the theme of the market during 2009 was “more sales at lower prices.” So far this year, we are seeing “more sales at higher prices.” The number of residential sales was 83.3 percent higher in the first quarter of this year compared to the same period last year, and the number of unimproved lot sales increased 166.7 percent on a very small number of transactions – eight vs. three. In addition, the average selling price of residential properties between January and March was up 4.0 percent over the same time last year, and the average selling price of the lots that have been sold this year is up 37.5 percent.

We are all keeping our fingers crossed that these trends will continue, signaling that the real estate market may indeed be on the first leg of a new growth cycle.

As always, there are still reasons to temper our optimism with a prudent dose of caution. For example, the number of foreclosure filings during the first quarter was 76.2 percent above the same period in 2009, and the forecasters say that we can expect a surge in the number of foreclosures as the year progresses.

If you or someone you know has thought about owning a place at the beach, now might be a good time to start thinking about converting those dreams into reality. There is still a large inventory of properties from which to choose; interest rates remain near historical low points but are expected to increase as the year progresses; and sellers are willing to consider reasonable offers.

In some cases, the attractiveness of current prices is hard to believe. For example, there are nine oceanfront homes for sale on the island that are priced between $450,000 and $600,000. At these price levels, buyers can purchase the house and the lot for basically the value of the lot.

There is a real estate adage that we only know when the bottom of a market cycle has been reached after prices start rising again. We are hearing more people saying, “I don’t know if the market bottom has been reached, but I think it is close enough that I don’t want to miss out on the next upward cycle.” Give it some thought – this may be the opportunity for which you have been waiting.

On Friday, September 25th, residents of Hatteras Island attended a public meeting at which North Carolina Governor Beverly Perdue, State Senator Marc Basnight, State Representative Tim Spear, a panel of scholars, and an executive from Duke Energy presented research supporting the construction of a wind turbine farm in the Pamlico Sound  west of Avon, Buxton, and Frisco. The details of extensive academic research were summarized, and cost/ benefit estimates were reviewed. The complete PowerPoint presentation can be viewed at www.climate.unc.edu/coastal-wind.

One goal of the meeting appeared to be to generate public support for a pilot project that involves the construction of one to three wind turbines at a designated site in the Pamlico Sound. As we understand the project, the most obvious and immediate impact of the wind turbine farm on Hatteras Island will be the adverse effect that it will have on the unobstructed views of the Pamlico Sound that we now enjoy.  This, in turn, has potentially negative implications for the island’s rental/tourist industry as well as the real estate values of certain types of properties. There could also be repercussions for other island interests such as the fishing industry.

The main presenter at the meeting and his accompanying graphics clearly indicated that the wind turbines will be visible from the shoreline.  The wind farm is planned to be located 7 to 9 miles west of Avon, Buxton, and Frisco.  Each wind turbine is expected to be rise about 500 feet above the water.  Five hundred feet is essentially the height of the Washington Monument (555 ft.); two and a half times as high as the Cape Hatteras Lighthouse; and , nearly one-half the height of the Empire State Building. Furthermore, as envisioned, the final project could contain as many as 138 wind turbines, covering a 25 square mile area of the Pamlico Sound.

The wind turbine project proposed for the Pamlico Sound may be just the tip of the iceberg.  Offshore in the Atlantic Ocean, 311 federal lease blocks covering up to 2,800 square miles have been identified as suitable for wind farm development.  Each block that is ultimately developed has been projected to hold as many as 49 wind turbines.

The associated fallout from introducing wind turbines into the unspoiled views of the sound that residents and visitors currently enjoy could reduce the rental desirability of soundfront and soundview properties as well as affecting the salability and values of homes and lots in these locations.

Not mentioned at the meeting was the fact that in early August, the North Carolina state Senate voted overwhelmingly (42-1) to ban wind turbine farms from the state’s western mountains. Does this imply that the spectacular beauty of Hatteras Island’s unobstructed sunset views across the Pamlico Sound is less worthy of preservation than views in the mountains?

There are many good reasons to consider wind power as an alternative energy source.  However, many unanswered questions and some very serious concerns about the proposed project in Pamlico Sound have yet to be addressed.

If you would like to express your views and opinions concerning the proposed wind turbine project, please contact the following individuals:

• Dare County Commissioners – dcboc@darenc.com
• Hatteras Island County Commissioner Allen Burrus – AllenB@darenc.com
• Representative Tim Spear – 919.733.3029 or Tim.Spear@ncleg.net
• Senator Marc Basnight – 919.733.6854 or Marc.Basnight@ncleg.net
• Governor Beverly Purdue –  919.733.2120 (Fax)

As the year progresses, there are very encouraging signs that the real estate market on Hatteras Island may be on the road to recovery.  Consider these market indicators:

• Average selling prices are moving closer to the historical growth curve that we saw prior to the boom years.
• The supply/demand curves are starting to trend slowly toward each other after being relatively flat and far apart for the past few years. If present trends continue, it looks like the market will be back in balance again in about two to three years.  This projection tracks closely with the estimates that are being given by industry leaders.  
• The number of monthly residential sales is starting to show a marginal increase. For the last several years about 10 residential properties have been sold each month on the island. So far this year, the monthly average number of sales has risen to 13.
• The Hatteras Island Pending Home Sales Index, a leading indicator of future sales, has remained above its long term downward trend for the past seven months.

We are not out of the woods by a long shot, and the recovery is anticipated to be gradual vs. a rapid turn around. There are still areas of significant weakness in the market.

• On a cumulative basis, between January and August, the number of foreclosure filings on the island equaled the number of sales of homes and lots.  Foreclosures nationwide are expected to increase through the fall of 2011 as exotic loans that were issued during the days of loose underwriting enter their interest rate reset periods. The magnitude of interest rate resets for No Documentation and Option ARM loans has the potential to create a second wave of foreclosures that could throw any market recovery off track.
• Very challenging financing conditions still persist for some segments of the market.  While loans are readily available to qualified buyers for loan amounts of $417,000 or less, financing is still tight, and underwriting requirements are still rigorous for higher priced residential properties and for unimproved lots. This year, only 6 homes have been sold with selling prices of $700,000 and above, and just 18 unimproved lots have been sold on the entire island.
• The presence of foreclosed properties and short sales, as well as the continuing gap between the supply of properties and the corresponding buyer demand, can be expected to keep pressure on the selling prices of both houses and lots.

For sellers of properties on Hatteras Island, the most important watchword in today’s market is “price.”  If you price your home or lot competitively, you stand a much better chance of selling it than if you hold on to unrealistic or outdated perceptions of value. For buyers, now is the time for action.  We are either at or very near the bottom of the current market cycle. There is a wide selection of properties from which to choose. Prices have significantly declined from the levels that existed during the height of the boom years, and interest rates continue to remain near historically low levels.

As you may recall, earlier this year there was quite a controversy concerning changes in homeowner insurance rates, deductible amounts, and surcharges that the North Carolina Insurance Commissioner approved for policies written in the coastal counties. Thanks in large measure to the combined efforts of the Dare County Attorney and the Government Affairs Director for the Outer Banks Association of Realtors, the changes which unfairly penalized coastal county home owners were modified by the state legislature and approved by the Governor in late August.

The Beach Plan, which is a pool of private insurance companies that write policies throughout the state, is the primary source of property insurance coverage on Hatteras Island and in 18 North Carolina coastal counties.  The main concerns about changes in the Beach Plan and the revisions that were adopted are as follows:

·        The Beach Plan policy deductible for wind damage (the amount that the homeowner must pay out-of-pocket before insurance coverage kicks in) would have increased from a flat rate deductible to 2 percent of the home’s value as stated in the policy with a minimum deductible of $1,000 on a per occurrence basis. In the revised version, the deductible was cut to 1 percent of the home’s value with a minimum deductible of $1,000 on a per occurrence basis.

·        The Beach Plan is allowed to charge higher rates than private insurance companies for the coverage that it provides. This additional cost is called a surcharge.  Surcharges for full peril coverage (the majority of policies) were scheduled to increase from 115 percent to 125 percent of the comparable private market insurance rate.  The surcharge for policies that provide only wind coverage would have increased from 105 percent to 115 percent. The surcharges in the final bill were left unchanged at 115 percent for full coverage policies and 105 percent for wind only coverage.

·        To assure that the Beach Plan has enough funds available in the event of a catastrophe, a provision was added that excluded insurance for homes valued at more than $750,000 unless coverage for the amount in excess of $750,000 is purchased from a private carrier prior to the issuance of a Beach Plan policy.

·        In a separate action, a rate increase of 6.5% approved by the North Carolina Rate Bureau for non-Beach Plan homeowner’s insurance policies bought in Dare County remained unchanged after unsuccessful litigation was filed to stop the increase.

Apart from the specific changes noted above, we think that one of the most important aspects of the legislation was that it represented recognition on the part of the North Carolina legislature that decisions about insurance should acknowledge that the different geographic regions of the state are interdependent when disasters strike rather than each region being viewed in isolation from the others.

When studying real estate market indicators it is easy to research and report the statistics.  It is much harder to try to understand and interpret the data that we are seeing.  The 1^st Quarter of this year is a classic example of this challenge. Here are the raw numbers comparing the first three months of 2009 with the corresponding period in 2008.

HATTERAS ISLAND MARKET INDICATORS 1^ST Qtr 2009 VS 1^ST Qtr 2008

At first glance, this looks pretty bad doesn’t it?  All major market indicators are down. In fact, there are number of positive stories contained within this data.  On the residential side, supply and demand appear to have stabilized. However, the gap between supply and demand, combined with an infusion of foreclosed properties into the equation, has caused selling prices to decline. This, in turn, has caused the dollar value (volume) of sales to decrease.  What is not shown in these figures is that the number of residential properties under contract has risen steadily for the past five months to the highest level since the August 2007, as savvy buyers have been quick to recognize great deals when they see them.

Another story that the unfiltered data does not reveal is that the luxury home market ($700,000 and up) has been severely impacted by factors in the lending environment. The highest residential sale price reported on Hatteras Island during the 1^st Quarter was $645,000!

Concerning the market for unimproved lots on the island, there is no way to get around it – this market was virtually non-existent between January and March. Just three home sites were sold during  the 1^st Quarter, and prices dropped precipitously. These results were a function of both the seasonal nature of lot sales as well as financing constraints.

When you take all of the facts and trends into account, my sense is that we are currently witnessing one of the truly great opportunities to buy real estate on Hatteras Island. And, this is good news for sellers because when buyers realize the benefits of purchasing now, inventories of properties will decline, and prices will once again begin to rise.

If you or someone you know has an interest in taking advantage of the current favorable conditions, please contact us at hranicka@hatterasisland.com.