As we approach the 2015 spring selling season here on the Outer Banks, it’s the perfect time to take a look at the overall health of the real estate market. Where have we been and where may we be going? Since the single-family homes make up 65% to 75% of our annual unit sales and 75% to 85% of our annual dollar sales volume, this article will only be referencing single-family homes from Carova to Ocracoke, including Colington and Roanoke Islands. All data is taken from the MLS of the Outer Banks Association of REALTORS.
Over the past 5 years, the annual number of sales has increased 11% (up from 1,029 in 2010 to 1,143 in 2014). The average active inventory in that same period has decreased 12% (down from 1,544 in 2010 to 1,358 in 2014). This constitutes a 21% improvement in our absorption rate which is the time it takes to deplete the current inventory at the current sales rate. In 2010, our average absorption rate was 18 months. In 2014, that number improved to 14.3 months.
Simple economics would tell you that an improving absorption rate would warrant upward pressure on sales prices. See the chart below for the average price per square foot (blue line) versus the number of annual sales (red line). There has only been a very modest gain in pricing since the low in 2011. That is an average of 1.4% annual appreciation. I would call [even] this small gain a victory after 6 years of 5% – 15% annual declines. The fact that the prices are slowly and steadily increasing is reassuring that we do not get into a “bubble” situation as we did prior to the peak in 2005.
It also appears that sellers are getting closer to what they are asking in 2014. I would attribute some of this to the sellers pricing accordingly on the front side, but also to buyers’ willingness to pay more for the property as our market has shown signs of strength. The average sold price / ask price ratio in 2009 was 93.2% when the foreclosures and short sales were peaking. In 2014, that ratio had risen to 95%. That is an average of $7,500 more in seller net proeeds!!
With the Outer Banks current market conditions, it makes a great time to both buy or sell. As a buyer, you can take advantage of relatively low pricing, strong rental income and very low interest rates that can be locked in over the life of ownership. As rents and prices rise, the mortgage stays the same, only increasing return on the investment. As a seller, you have a stronger command over your price, especially when you have strong rental income to justify the buyers’ investment.
I hope you enjoyed this general market snapshot. For more detailed information on any segment of the market, please feel free to call Adam (252) 256-0086 or Shane (252) 202-1193 with OBX Island Guys of Outer Banks Blue. firstname.lastname@example.org or email@example.com