Though Times are Changing, Area is Still Good Investment
By: Angie Brady-Daniels
T here’s no arguing that the Outer Banks real estate market has tipped. Properties are not selling at the level they were in 2005. However, the experts seem to agree that it is definitely a buyers market and that the Outer Banks is an excellent investment.
North Carolina and Virginia top the charts as places where American most want to live in a recent study, the Anholt State Brands Index. The survey polled more than 9,000 U. S. citizens and 12,000 people in 15 other countries on their attitudes and perceptions of all 50 states. Questions regarding physical aspects of each state, economic and educational opportunities, lifestyle appeal, people, and basic qualities and infrastructure were designed to give state administrators and economic development offices insights into how their state is perceived within and outside of the United States.
In another 2006 study by the BizJournal, the Town of Kill Devil Hills was named one of the three best communities in the United States for quality of life. Bizjournals’ study identified small communities that would be most attractive to people, places with strong economies, light traffic, moderate costs of living, first-class education, and good access to big-city attractions.
The raw data used in Bizjournals' study comes from two federal agencies, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis. All of the figures are the latest, most comprehensive statistics available at the micropolitan level.
The study gave Kill Devil Hills a quality of life score of 11.49 and stated “This beach resort is gaining popularity as a year-round home, as shown by its population increase of 13.1 percent in five years. The economy is also robust, boasting the fourth-highest concentration of small businesses (56.9 per 1,000 residents) in any micropolitan area.”
“The Outer Banks is certainly not a secret anymore and continues to grow at a steady rate,” said Outer Banks Chamber Chairman of the Board Bruce Austin.
The summer economic indicators showed an increase in tourism revenues for 2006. Dare County Occupancy revenues are up 10.5% through November, and Currituck County’s Occupancy Tax Receipts were up 64% for the year Food and beverage receipts have also remained consistent.
“This is good news for a couple reasons,” said Austin. “First, it demonstrates how our economy is diversifying. While the industries do inter-relate, they are separate to the point that they can and sometimes do grow at different rates. Second, our visitors are our potential investors. Growth in the tourism area means that new people are visiting and falling in love with the area. This creates demand for housing, business investments, and the purchase of second homes.”
But some are looking at the area as more of a place to live than an investment. The continuous rise of property values had caused some locals to shy away from buying additional land and property over the years. Other surveys show that some residents and visitors want to limit and control future growth.
Manteo Town Mayor John Wilson said the consensus of his town was to the need to maintain small town character, hometown sense of community and preserver the history of the town. He also said residents want to protect the environment and area wetlands, require new development to be in character with the town, to protect shellfishing and water quality, to provide an adequate amount of public parks and open spaces, and to grow at a controlled pace coinciding with the amount of services that the town can offer to residents and visitors.
Manteo is not alone in their attempt to balance quality of life issues for those that live along the coastline year round with the attractions that draw visitors throughout the year. A 2005 Dare County Housing Study by the Outer Banks Community Development Corporation supports the claim that locals would like to preserve a bit of the area for themselves and the next generation of those who wish to live and work in the area year round. Surveys show significant increases in the number of workers needed to support the tourism economy of the region but yet very little “affordable” housing is available for those workers. A significant number of those employed in Dare County live in adjacent counties and commute significant distances to their places of employment.
The 2000 Census provides detailed data on the nature of the local housing stock. There were 26,271 housing units recorded in Dare County as a whole. Of these, 12,690 were occupied and 13,981 were recorded as vacant (52.4 percent of the total). This is indicative of the seasonality of the housing market in this area.
From 2000 to 2004, median Dare County incomes reportedly rose by 20.8 percent, but the average cost of new residential construction increased by 47.1 percent—a very significant discrepancy, with significant ramifications for housing affordability.
The 2004-2005 comparative real estate sales numbers for the Outer Banks show that while the number of new home sales did drop by 4 percent in 2005, the average cost of a home increased by 8 percent.
Homes sold 2004 – 2258
Homes sold 2005 - 2164
Change -4%
Avg. Sale Price 2004 $506,110
Avg. Sale Price 2005 $544,893
Change 8%
2004 $1,142,796,398
2005 $1,179,147,674
Difference 3%
Source: NC Association of REALTORS, Outer Banks MLS Statistics
But most real estate agents agree that owning Outer Banks real estate is always a win-win despite the changing market.
“There has been a real excitement of building along the coast over the last few years. Prices went way up due to the great demand,” said Jim Perry of Jim Perry & Company. “While in realignment, we’re still priced below our competition and there’s real value in an Outer Banks investment.”
He continued to say that he believes that history proves that life is a series of cycles and that this adjustment is a normal adjustment.
“We will see the market rise again but it may not be as quickly as we’d like,” he said.
Perry believes that there are still many advantages to investing now, that over time the market will stabilize and increase the value of what we have now.
“Perhaps this will push us towards remodeling, redevelopment, modernizing and creating a newer, better product for the future of our area,” he said. “Occupancy has been up so that demonstrates that our visitors see great value in their vacation experiences. The ocean and sounds continue to draw people to the area but we as a community will need to continue to look for ways to enhance those experiences.”
Perry cited the OBX Marathon held in November 2006 as an example of the possibilities.
“We, professional, community, civic and trade associations, need to continually look for new ways to work together to enhance the whole experience of an Outer Banks visit,” he said. “People are continuously working on new ideas, ways to enjoy the natural and historical attractions of our area that will boost our off-season and continue to raise the value of an Outer Banks investment.”
Commercial Real Estate Agent Henry Griffin whose family has owned property on the Outer Banks since 1859 says that historically, the rental market has been just a small part of owning a rental cottage at the beach.
“More important for most families has been establishing a ‘heritage’ or ‘tradition’ of summering at Nags Head. This tradition goes back to the 19th century for many families and is still in place.”
Griffin goes on to say that for many of today’s renters, who come for a week or two each year, the dream of ownership and, indefinitely, establishing a Nags Head tradition, is a strong motivation to buy a cottage when able. As the baby boomer generation enters the pre-retirement and retirement age, the demand for Outer Banks property continues to increase. Despite short-term readjustments to the market, over time real estate on the Outer Banks will continue to be an appropriate purchase for many.
Griffin’s partner Bobby Harrell agreed.
Harrell has been involved in the real estate business on the Outer Banks since 1983, having originally gone into business to sell, manage and develop farmland and timberland. However, during the 80’s, the resort real estate market was so strong that we focused our energies and capital into resort sales and development.
In the late 80’s, Harrell and Associates grew to three offices, 26 agents, and numerous ongoing large projects. Then came what we refer to as “the recession”. Our company shrunk to one office and only a few agents, but we continued to be diversified. We sold resort, investment, year round residential, commercial improved and unimproved properties, leased commercial properties for absentee owners, sold farmland, timberlands, hunting properties. No one product caused us to survive the recession, but our diversity, attention to details, and keeping past clients aware of opportunities as the market began to recover from the recession.
“Those clients have stayed with us and were rewarded through the late 90’s and early 00’s as the area markets soared in value,” said Harrell.
Harrell’s advice to buyers is to look carefully at today’s market for opportunities.
“While our next up cycle may not be the ‘out of control feeding frenzy of the late 90’s’,” according to Harrell, “we anticipate rewarding opportunities for people who enjoy the Outer Banks. Our environment is very clean, we’re safe, accessible and still the best value along the East Coast.”
And he added, “It’s just not a financial investment. The real return is in sharing our Outer Banks Lifestyle.”
And what do the experts think we’ll see in the next few years?
Well most think that patience is an important factor and that growth is around the corner even if not at the same rate of previous years.
Barb Connery of The Sun and Sea Team, ReMax Realty said she feels confident the Outer Banks will rebound from the correction and continue to grow.
“All the indicators that I’ve read lead me to believe that we will rebound from the current real estate price correction relatively soon and that we’ll see slower, but consistent and healthy, growth on the Outer Banks over the next few years, as long as we are mindful of our infrastructure and the health of our beaches,” Connery said. “People want to live at the beach, and we have the best beaches on the east coast. We need to get serious about keeping them that way.”
Bob Evans of Bob Evans & Associates said that he predicts a tremendous boom for the remodeling industry and a return to more modest sized homes, owned by folks with more means, and with no intent to rent.
“Our boating population will increase dramatically,” Evans added. “Buyers will start looking stronger at locations away from the water, in more protected locations.”
Monica Thibodeau of Carolina Designs said she thinks that coastal areas will continue to attract more visitors and people who wish to relocate and that the area will grow and thrive.
“Our amazing natural surroundings, the mild climate, the low tax base and strong services make this a wonderful place,” said Thibodeau. “We are so fortunate to live in a pristine area, and the entire state of North Carolina has so much to offer. Even though prices have increased dramatically over the past few years, we have always been a good value. This area will continue to grow and thrive.”
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