2022 Real Estate Market Recap and 2023 Outlook: Key Trends and Forecasts

Posted on March 17, 2023 in Selling Tips.

As 2022 began, it appeared to be following a similar trajectory to 2021. The MLS report from the Outer Banks Association of Realtors revealed record-breaking sales in December 2021, along with the lowest inventory levels ever recorded. Meanwhile, in January 2022, the average 30-year fixed mortgage rate was 3.22%, a slight increase from the 2.96% average seen in 2021. Despite these factors, buyers remained enthusiastic about the prospect of homeownership due to the low rates and limited inventory.

The real estate market experienced a significant shift in the second quarter of 2022 due to the Federal Reserve’s drawback on mortgage stimulus and sharp inflation growth. This shift was evident in Corolla, where on March 2nd, 2022, there were 76 oceanside properties under contract and only 14 active listings. However, by the end of May, the number of properties under contract had dropped to 29, while the number of active listings increased to 39. This was a drastic change in less than three months. Mortgage rates continued to climb throughout the year, with the average 30-year fixed Freddie Mac rate reaching 7.08% by October.

The Outer Banks Association of Realtors MLS Statistical Report revealed a 28% decline in property sales in 2022 compared to 2021. However, despite this downturn, the residential median sales price rose by 17%, while the lot/land sales price saw a growth of 20%. Notably, median sales prices for residential homes have been steadily increasing since 2022, with rises ranging between 17% to 20%.

According to the Association of Realtors Pending Homes Sales report, there has been a rise in pending homes for the first time since May 2022. In the northern beach market, which includes Corolla through South Nags Head, Colington, and lower Currituck, only 42 homes were sold in January 2023. This figure is in stark contrast to January 2022 when 124 homes were sold, or January 2021 when 135 homes were sold, resulting in a 68% decrease in sales compared to the 2021-2022 averages. Interestingly, in January 2019 (pre-COVID), there were 62 homes sold, which is 33% more than in 2023.

It’s worth noting that the national and local markets were in a comatose state during the last five months of 2022, thanks to a 40% appreciation over the past 36 months and around 7% mortgage rates. From August 1st through December 31st, 360 pending sales were recorded, compared to 559 pending sales in the same period in 2021, representing a 36% decrease. Looking ahead, there is good news for the real estate market that may help to stimulate activity:

• Home prices are expected to decrease by around 10%.
• Mortgage rates are currently declining.
• Sellers are more willing to negotiate, and the trend of upward price pressure has subsided.
• Despite the recent market downturn, buyers are still eager to make purchases, and there are sufficient buyers in the market.

Despite the recent downturn, inventory remains very limited, and this scarcity factor has been somewhat offset by a reduced number of buyers. For sellers considering a sale, being in the first or second position in terms of value and price in your specific market is advantageous when there are only a few competing homes available. A recent example from Nags Head illustrates this point, with a home listed in the first or second position receiving six offers within 36 hours, resulting in an accepted contract.

For buyers, the situation remains largely the same, meaning they must be prepared to act quickly. This entails having financing in order and being ready to visit or view properties remotely via Facetime or other means. However, the timeframe for making a decision has shifted, with buyers now expected to make a decision within two to four days, compared to two to four hours in 2021-2022.

For more detailed information on the current state of the Outer Banks real estate market, please feel free to call Danny Fenyak at (252) 256-1818 or email him at dfenyak@outerbanksblue.com.

Outer Banks Market Trends

Posted on April 12, 2018 in Selling Tips.

We’re starting to get our first glimpse of the 2018 Outer Banks economic picture and the image that is emerging is of a growing and healthy economy. Tourism continues to increase, the real estate market is strong and the indications are that new construction continues to expand.

It’s important to remember that this is based on statistical information and there are a number of variables that may affect the numbers.

As an example, one of the numbers we look at for our tourism picture are Occupancy Tax Collections as reported by the Outer Banks Visitors Bureau.

The numbers they report do not include increases in rental rates or any increase in the number of properties or rooms available for visitors. With that caveat in hand, we would also point out that by any standard, Occupancy Tax Collections have far outstripped the rate of inflation over the past 15 years.

Occupancy and Meal Tax Collections

These statistics come from the Outer Banks Visitors Bureau and are for Dare County only. Currituck County also collects Occupancy and Meal Taxes but their reports have a considerable lag time.

As noted earlier, all indications are that the Outer Banks tourism industry is healthy and growing.

Although Hatteras Island lost two weeks of revenue because the company constructing the replacement bridge across Oregon Inlet severed the power line to Hatteras Island, Dare County collections still grew at an annual rate of 5.8%. The only glitch was a 4.5% decline in August—undoubtedly a reflection of the situation on Hatteras Island.

Overall, the northern beaches outperformed Hatteras Island, although the power situation certainly affected that.

What does this mean?

Generally speaking rentals increase at about the same rate as inflation. There are a number of mitigating factors in that, but as a basis for understanding what’s happening, that is a good place to start.

With that in mind, the increase in collections occur in two areas: stronger shoulder seasons and more properties or rooms available for rental.

Both would seem to be the case.

We know April and May in the spring and September and October in the fall have become increasingly important to the Outer Banks economy and the numbers bear that out. From 2016 to 2017 shoulder season occupancy increased by 13.5%.

Visitation is harder to quantify because there is no one method to count visitors that everyone agrees is accurate. There is, however, some evidence that an increase in visitors is also occurring. Jockey’s Ridge State Park in Nags Head reported more than 1.5 million visitors last year, an increase of 18.8% over 2016, making it the most visited state park in North Carolina.

Real Estate Sales and Construction

We’re going to start this section with a reminder that nothing substitutes for working with someone with knowledge of the local market. There is a lot of nuance in any market and that’s where the experts at Outer Banks Blue become so important.

The Outer Banks real estate and housing market is healthy. The exception seems to be commercial properties that do not seem to be keeping pace with residential sales, but other than that, there does not appear to be much of a downside in the market.

A quick snapshot of the health of the real estate sales is Land Transfer Tax collections. Since every real estate transaction in Dare County carries a transfer tax, trends in the market can be tracked.

A transfer tax is a percentage of a sale and has nothing to do with the number of sales that are happening; nonetheless, if over time, there is a steady increase in collections, it’s a very good indicator that the market is expanding.

For the past five years at least, Dare County Land Transfer Tax collections have been increasing. Although we are at the mid point of fiscal year 2017-2018, it looks as though 2018 will continue that trend. Through February collections were up 6.6%

One of the trends that does seem to be emerging is a shift from a buyer’s market to a seller’s market. It’s never all one way or another, but there are some indicators that point to the change.

In 2011 the average number of days on the market after a property was listed was 238; through February of this year, the average number of has been 152.

The number of units sold is also an indicator. In 2011 1075 units were sold; in 2017, which gives us a full year for comparison there were 1544 units sold, a 43.6% increase.

The increase in the number of units sold and coupled with a decrease in days on the market is consistent with investors looking to take advantage of a growing visitation market. Not everyone is purchasing a property for rental, but an increase in Occupancy Tax collections coupled with indications of an increase in the number of visitors coming to the Outer Banks seems to point to more investors looking to Outer Banks property management opportunities.

There is a significant amount of new home construction on the Outer Banks, and early indications are that it will continue.

For the year 2017 there was a small decrease in the number of building permits issued. That trend seems to have reversed itself through February.

Building permits are very much in the raw data category. Permits are sometimes issued but construction never takes place. The number of permits also does not say what the permits are issued for. Nonetheless, there is some interesting information that can be taken from the initial reports.

The number of permits issued through February is up a modest 2.6%, but what is significant is the average permit value has increased by 11.5%. That is a clear signal that that larger, more complex projects are being planned, and a part of that would be new home construction.

That means the Outer Banks tourism market will continue to expand. It also means that, for existing rental property owners, a competitive market is going to stay competitive and may become even a bit more competitive.

Which brings us to another important point to consider. Summer is coming; properties should look as good as possible with any improvements done as soon as they can be made. However, looking at the trends in construction, it is apparent that contractors and builders are very busy right now. There is going to be lead time in getting any work done. Schedule the work as soon as possible.