A friend recently expressed concern about his vacation home rental income. He told me that he had raised all his weekly rates 15% every year since 2020. In those past years, he was fully booked for the next year by November 1. This year he still has a few weeks available and was concerned. Could he have asked more for those 2020 and 2021 weeks and still booked the entire summer? An argument could be made that he had below market rates those two years since they booked up so quick. This year I think he found the market.
This story reminds me of the current Outer Banks real estate sales market. Over the last few years, we had many buyers who valued OBX homes at more than the asking price. This resulted in multiple offers and over asking price sales. It was hard to pinpoint exactly what a buyer would pay.
Changes in the Outer Banks real estate market make it much easier for a Realtor to determine what a buyer will pay today for a property. That’s because the vast majority of homes sold today don’t sell for significantly over the asking price. Also, buyers are not making offers on homes priced significantly over the last sale. Buyers are increasingly price sensitive. Realtors now can find that sweet spot where a buyer will make an offer and chances are good that another buyer won’t pay more anytime soon.
Another positive of the current market for sellers is that there’s very little competition. We’ve been keeping track of the number of Outer Banks properties for sale for close to 20 years. This information is collected from the Outer Banks Association of Realtors’ MLS system on or about the 15th of each month. Inventory has never been this low at this time of year. As a result, if you are selling then you won’t be competing against many other sellers for those buyers who want to buy today.
Cost of Money
The biggest negative to our market today is interest rates. They’ve jumped up over 2% since the middle of the summer. That means that for every $100,000 borrowed, about an additional $2,000 a year in interest will have to be paid. As a result, of this change, many buyers are purchasing with an adjustable rate mortgage (ARM) because they expect interest rates to drop in 2023. ARM rates are considerably lower than the normal thirty year mortgage. These new interest rates have eliminated some of the buyers. It’s probably the biggest contributing factor to buyer’s hesitancy to pay higher prices. We have found the market in Outer Banks real estate sales.
So what can we expect in the near future? I believe we’ll return to a more normal market in the new year. Historically speaking, inventory is lowest in the winter so it might be March or April before we see the inventory signifcantly higher. Also, a large portion of our buyers want to purchase before the summer. Many economists believe rates will go down early next year. It’s likley buyers will have renewed interest early next year as well. For a complete analysis of a specific Outer Banks area, please contact Scott Team Realty. We’d be happy to share what’s going on in each area with you.