By Kip Tabb | Outer Banks Voice on February 16, 2021
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.”
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.