OBX home sales boom as rental stock shrinks

By on February 16, 2021

(iStock)

By every measurement, 2020 was an unprecedented year for real estate sales on the Outer Banks. According to the Outer Banks Association of Realtors’ (OBAR) MLS report, every community on the Outer Banks with the exception of Colington and Ocracoke saw double digit gains over 2019 in the number of properties sold.

“I’ve been here twenty-seven years since I got my license. It’s never been like this. It’s not even close,” said Dave Watson, Broker in Charge at Southern Shores Realty.

One of the trends driving these housing sales could potentially have both short-term and long-term consequences for the Outer Banks. More people are buying properties that have traditionally been rented out and are taking them off the rental market — often to use them as their primary residence.

One of the reasons for this is the COVID-19 pandemic, which has re-aligned lifestyles and shown that work previously done in office settings can be accomplished remotely. That is leading businesses to rethink their operations and workers to rethink where they want to live.

“There’s people that have said, ‘I can work from anywhere. So why wouldn’t I work on the Outer Banks?’” said OBAR Executive Director Willo Kelly. “There are people that are buying vacation rental homes and taking them out of the vacation rental program.”

“Our inventory is so low right now [it] might be your only option is to buy a vacation rental and to live here year-round,” she added. (A report released by OBAR on Feb. 15 found that total inventory in Jan. 2021 was down 51% from the same period a year earlier.)

It is a trend that Brindley Beach Broker Edith Rowe has also seen over the past year.

“I think people are buying more now for personal usage,” she said. “Mostly because everybody can work from home and school is remote…I would say maybe about fifteen percent of my buyers have decided not to rent the houses. It’s higher than it was in the past.”

Her observation is confirmed by Maggie Sexton, Vice President of Rentals at Village Realty. “We have seen a good bit of that this year, more so than in previous years,” she said, quickly adding a qualifier. “We might have had, I would say, seven percent of our inventory…that was removed from the rental program. It’s not uncommon for us to have a loss of four or five percent. It increased a few percentage points, but it’s not like it quadrupled or anything like that.”

What this trend could mean

The current housing trends on the Outer Banks could impact everything from county revenues to the availability of reasonably priced housing.

For Dare County, gross occupancy tax collections in 2020 were up 11.2% over the previous year according to the Outer Banks Visitors Bureau. Although occupancy tax collection numbers do not include how many homes were rented or for how much, an increase that large indicates a remarkably strong market — one that rebounded quickly from six weeks of closure in the spring when access to the Outer Banks was restricted because of COVID.

The early signs are that 2021 will be as strong if not stronger, with many people hoping to get out and travel as the pandemic hopefully eases.

“It’s going to be a good rental year,” Watson said.

Although consolidated preseason bookings comparing 2020 and 2021 are not available from Outer Banks property management companies, Watson’s statement is borne out by numerous reports indicating vacation bookings for the upcoming summer are up by as much as 30% nationally.

If it the trend toward red hot home sales that are accompanied by the removal of rental properties from the market does continue, there are very real financial implications for the Outer Banks.

Outer Banks counties are some of the few locations in the state that are allowed to collect a land transfer tax on properties that are sold. Dare County’s collections for 2020 were almost $11.4 million, 52.3% greater than 2019. And collections for January were almost $1.2 million, more than double January 2020.

By law, the land transfer tax the counties collect must be used for capital improvements, and Kelly points to a number of possible uses for the funds.

“They’re sitting on a ton of money that goes into the capital improvement budget, which is used to buy a property, to build buildings, or to build schools,” she said.

She then adds a cautionary note.

“When you build a palace. It takes a lot of money to maintain the palace. To keep the palace,” she said.

But the red-hot seller’s market has other implications for the Outer Banks. As is the case with a number of tourist-dependent communities, reasonably priced housing for service workers, construction workers and government employees is very difficult to find here.

With the new wave of purchasers buying properties at top dollar, there will be a ripple effect. Property values will increase making home ownership even more difficult for the people who work here.

As residents are unable to buy a home, more will have to rent, and as more families look to rent, the basic rule of supply and demand will come into play and year-round rental prices will increase.

 

 

 



 

 

 



Comments

  • Waldo

    School isn’t going to be remote forever. When a house is removed from a rental program to be occupied full time, the occupancy tax goes away, and the load on schools increases. A one time transfer tax only goes so far. If the trend continues, County and town budgets for residents’ services will need to increase as the occupancy taxes drop.

    Tuesday, Feb 16 @ 5:07 pm
  • Travis

    The beach is filling up and so the pressure will grow to build bigger and/or increase density. This has been playing out in the north beach towns for years. The character of this beach is changing quickly and if residents want to preserve the small town charm, they need to establish limits to growth sooner rather than later.
    In the meantime, the only real obstacle to growth is the transportation infrastructure. There’s no room to widen NC 12. US 158 faces similar problems in spots but more importantly is the lack of public support to grow the bypass.
    As far as affordable housing, that joke has gone on long enough. Currituck is your last best hope if you want to work near the beach and own your own home on a middle class budget. There’s not enough political will to create true affordable housing here.

    Wednesday, Feb 17 @ 10:00 am
  • TeeJay

    Sales increased everywhere but in Colington. LOL!

    Wednesday, Feb 17 @ 10:12 am
  • hightider

    If anyone believed the Mid Currituck Bridge was in the works, they can relinquish that dream now. The state is so deeply in debt, the controversial bridge is no longer a viable option. Good luck exiting the northern beaches prior to a hurricane.

    Wednesday, Feb 17 @ 11:44 am
  • mikem

    Sales seem high because many have pulled their property off the market while we are in a Pandemic. So, it seems hot, but the market is not. Remember, asking a realtor how the markets are doing is like asking an alcoholic if they want another drink..

    Wednesday, Feb 17 @ 7:43 pm
  • obxmike

    If “middle class” is described by having to work two or three jobs to live here, I suppose you’re correct. The “middle class” in Dare County is very thin. How does this county attract those who want to live and work here? Travis, spot on about “affordable housing”. Sad reality that many raised here leave and don’t come back, except to vacation here…maybe. I’ve heard that those who don’t get out call it “failure to launch”. Interesting.

    Wednesday, Feb 17 @ 8:20 pm
  • Frank Zappa

    What a joke…what was that one lady saying about maintaining a palace and keeping a palace? Haha the OBX lost its palace designation decades ago. Greed and chasing after the almighty tourism dollar has been in place for a long time. This place is not where I want to live anymore. I’m moving soon and been here since the late 1970s. I went to high school here and grew up here. Unfortunately it’s not like it used to be. Outsiders and increasingly rude people here in the Summer months and a government that caters to greed and corruption. Look at what’s happening folks. Traffic will be worse, our local hospital charges double even triple the cost of procedures Nationwide. Dare schools are filling up. I applaud all those long time residents willing to stay but it’s not for me and many others anymore. I’m moving hopefully before this Summer hits. Covid will be bad here too with the tourist season especially after the way they acted last year. Covid is far from being over folks. I may come back to visit here and there but only in the Spring and Fall maybe. I’m sorry to see what’s happening to the OBX area. Many can’t even afford to live here anymore. Goodbye OBX!! It was good while it lasted. I hope this gets printed and not censored OBX Voice. Thank you for being a good source of news in most cases!

    Friday, Feb 19 @ 4:34 pm
  • snoppymonday

    There are many comments here regards the availability of housing to me the fight was lost long ago. All local government is dominated by those in real estate and related industries, including property management companies. The OBX will be constrained by its infrastructure. Those who are able to purchase property here to live will not be those in the working class for sure and they will demand more and better services. It is inevitable property taxes will go up to pay for those excesses. Dredging the bay and replenishing the beach gets more expensive just like repairing Highway 12 every year after a nor’easter or storm. So the door is open if you wish to leave but where do you go? Life is still good here at least in the short term.

    Saturday, Feb 20 @ 6:23 pm
  • Sandflea

    snoppymonday;
    Not being sarcastic, but there is a whole lotta country out there. Nashville, Denver and many other cities are booming. Public services, healthcare, higher education, etc are significantly better. This area forever changed last year when all the I, me, my people bought up many houses that used to be rentals. Many lots bought up with new construction further stresses the system. You’re correct in saying that they will demand much more (that’s their nature) and there won’t be the support help to cater to their demands.

    Sunday, Feb 21 @ 2:53 pm
  • NVA Agent

    Frank Zappa……if you are moving, I am interested in your property!

    Wednesday, Feb 24 @ 12:36 pm
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