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National housing story is a familiar one here
Outer Bankers tend to be avid followers of The Weather Channel. Living on a thin sandbar within striking distance of hurricanes tends to grab one’s attention. But the Weather Channel has new rivals here — CNBC, Bloomberg and Fox Business News.
Since the real estate crash began in earnest during 2005, local residents have become attuned to real-time data on the mortgage industry. Besides 10-year T-Bond rates and stock market variations, home sales, existing and new, are on the tips of many tongues.
So recent reports that new homes sales fell 12.4 percent nationally in July, a record low would have been expected to add to the local misery index. Instead, Outer Banks Realtors and home builders seem to have taken the news in stride.
Locally, the real estate crash became acute in mid-2005, some two years before the national real estate market crashed. And while the construction boom fueled the purchase of some new and existing homes among residents with jobs tied to the real estate or construction industries, the vast majority of new home sales locally were snapped up by investors or second-home buyers.
Recent data circulated by David Watson of Southern Shores Realty and derived from information generated by the Outer Banks Association of Realtors and the Outer Banks MLS shows the local housing market, at least in northern Dare County and the Currituck Outer Banks, resembles the hospital monitor of a “Code Blue” patient.
Properties listed on MLS for the most part represent existing inventory. Active listings as of late August in the two areas stood at 2,271 properties. Since 2006 that number has remained about the same with the low-water mark of 2,341 attained in January 2008.
At the same time, the monthly number of houses “under contract” has been moribund. In January of 2007 the number of houses under contract stood at about 187. For the past three and half years, that number has not risen above 225 (May 2007) and currently stands at 159. The bottom of that range was 110 in January 2009.
Given the incredible imbalance between homes listed and those under contract, it is obvious the local housing market is treading water. Each month, about the same number of houses sold are replaced by new listings. In many cases, those new listings represent the huge number of foreclosures and short-sale offerings hitting the market on what seems to be a daily basis.
While many Realtors claim to see an uptick in sales and closings, the data does not reflect an upward trend. In addition, list prices continue to fall according to other data released by Watson, gathered from the same sources.
Additionally, list prices since April continue to drop monthly in a range from about 2.7% to 4%. A final note, the value of MLS listings — based on the listed sales price — stood at $1.2 billion in March of 2010, and $1.14 billion as of Aug. 24 according to Watson’s data. On Aug. 24, a mere $73 million was under contract.
Sales of new homes nationally are one of many indicators reflecting the overall health of the economy. In as much as a steady increase in the sales of new homes might signal a national recovery and the draw down of existing home inventories (such that construction can begin anew), new homes sales are not really important to the local market.
The Outer Banks lacks a true middle class composed of corporate and government employees. Instead, our economy relies heavily on “trade” labor and commission compensated sales professionals, most of whom are self-employed.
Until the huge backlog of existing, vacation rental homes experience a significant decrease, local Realtors will continue to struggle, and trades employees will languish as well. When, and if, that backlog is depleted will be the time new home sales locally, whether vacation rental homes or permanent residences for the Outer Bank’s work force, become a relevant number.
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Sam Taylor says:
Rob-
Good, fact based article. I believe you meant “experience a significant DECREASE” in the last paragraph.
A “true” middle class also includes local merchants of various types. Indeed, that was a large part of its origin. We still have those dependent on seasonal tourism. That this has held up fairly well has prevented a catastrophe.
Sam
ekim says:
Local realtors ain’t the only ones struggling. As for the comment TRUE MIDDLE CLASS there are more government-employed than working class. How are we going to feed that beast?
John says:
According to obxmls.net,there’s currently 2019 residential properties of all types,available today on Outer Banks Dare,Currituck and Hyde counties. There’s 2221 residential properties in the entire area,which includes some listings in 10 mainland counties.
I track single family homes on the Outer Banks. The inventory has been falling since early spring,in spite of the the flood of bank owned homes. To me that’s a positive in itself.Our current inventory is at the lowest levels of the year.
According to Scott Realty’s report
http://scottrealtyobx.com/files/marketindicators.pdf
July 2010 sales agreements are up almost 30%,compared to July of 2009.Year to date sales are on track to be the best since 2005. Default notices have also been lower in recent months,compared to 2009. I’m not a real estate agent,but when it comes to the Outer Banks,my glass is half full. I do believe our local RE market has outperformed the national market in recent months, in terms of sales. There’s plenty of money out there,contrary to the doom and gloom of the news media.
In my travels along the back roads from Southern Shores to Nags Head, it appears to me that more homes are also under construction this summer compared to 2009, and renovations have increased.
Our 2010 tourist season will most likely be the strongest in history, yet another positive. The excessive wear and tear and increased rental income should benefit our local workforce throughout the winter season. Unlike 2009, the majority of construction workers that I know have some work.
Sorry Russ, I just don’t see all the negatives in our local area. In 2009, I would have agreed.
Bill says:
John–
Get your head out of the sand! Our local workforce is still coping with bills from last year. This spring was so bad retail/restaurant/tourist wise that this winter is going to be a struggle for a lot of people on the Outer Banks. While the bulk of this season was great and reached levels of 2007(the last banner year here as far a tourism $$$) the true workforce(hourly employees) are going to have a long hard winter. The realty companies and rental home owners will not foot the bill from the “excessive wear and tear” they are still trying to recover from last couple years as well. Do you have any friends in the renovation business? One at of ten may have some decent work going on, but the future is not as bright as you forecast. Must be the realtor in you! Not trying to be negative, just realistic.
Russ Lay says:
@John: Virtually any real estate “expert” would define a healthy market as one where 25% or more of the homes listed are under contract. We run less than 15%. In the link you cited, we are taking small numbers and comparing them to slightly better, but still small numbers. As the Scott Realty article you linked to cites, “Short sales and bank sales represented 34% of residential sales in July. As of this writing, there are over 100 bank owned residence in the local MLS….That is close to the total number of sales per month”. THAT is not a sign of a healthy real estate market and it explains much of the increase in sales.
Jeff’s article lists 320 home sales total (out of an average of 2,200+ listed EACH month) through June 30. Sure, that’s a 30% increase from 2009, when we had sold 231 units, but percentage increases are misleading. If my chance of getting cancer increases from 1/1000 to 2/1000, that’s a 100% increase, but negligible in terms of real numbers. I’ll fire up that Cohiba.
Now, let’s look at some of Jeff’s data in detail. Southern Shores went from 23 homes to 39 homes (a whopping increase of 16 units). To accomplish that the average sales price dropped from $590K to $497K, a 16% decrease. Is that healthy? If SUV prices dropped from $40,000 to $20,000, sales would increase and less folks would buy hybrids, but at what cost to the manufacturer? And Southern Shores homes spent 138 days on market in 2009, but 258 in 2010. Finally, 51% of the 2010 sales were classified as “distressed” in 2010, versus “0″ in 2009.
I don’t consider myself part of the doom and gloom media. In fact, I made, and continue to make (as a mortgage lender) a significant part of my income from real estate. But, the Voice is not here to spin. I will invite you to visit my office one day and see just how little movement there is out there, and how hard it is to make even one loan go through for a buyer.
ekim says:
Thanks Bill and Russ. John has no clue. With a sad heart I will make this prediction: in the next 6 to 8 weeks watch for big foreclosure numbers on small biz and homes. It’s going to be a LONG COLD WINTER!!! on this little sand bar.
Derek says:
Note to John, who says things are improving. You forget the number of listings is decreasing because sellers are giving up and not relisting! In many cases because they cannot sell at today’s pricing because they owe too much and are going to try to wait it out. The other reason the # of listings is on the drop is that properties listed have gone to foreclosure and are now in that pipe line. Even though the total number of sales has increased, the prices are still dropping and that is anything but good. If you want to know what the market is really doing look at the total of under contracts and properties sold. Those are real numbers!
Russ Lay says:
Now, now Ekim! John isn’t clueless, he’s expressing a hopeful opinion (one I don’t share based on fact, but share based on hope that I am wrong). None of us in the industry forecast the depth of this bubble-burst, so I doubt any of us will forecast the upturn. While I think I am right on this, I’d eat a ton of crow if John proved correct–gladly
Allan says:
eKim, don’t let yourself become eeYore! Spring will come.
Robert S. says:
The article here was written to bill hope. It’s a lot worse then they let on in the OBX area.