What’s going on, everybody? I am your Emerald Isle Vacation Home Specialist, Denis Raczkowski, with another article on the Outer Banks, Emerald Isle, and the Crystal Coast. As always, I appreciate you clicking on this article. Hit the subscribe button; it’s free. Today’s article is about a challenging real estate phenomenon called 'lack of inventory.' One of my clients recently said, “There is nothing to buy.” And with mortgage rates trending downward, is it any wonder that buyers are impatient and frustrated? If you feel this way, this article is for you. Potential sellers should pay attention, too, because what is a seller’s market today can quickly turn into a buyer’s market in a general election year. Historically, the housing inventory along the Crystal Coast, the number of homes on the market, was rather healthy until two events impacted the local market. The first was Hurricane Florence, which ravaged the Crystal Coast in September 2018. Housing inventory fell from a high of 13,000 to a low of under 5,000 in a matter of days. The second was COVID-19. The buying spree precipitated by this pandemic reduced inventory to below 3,000 homes. The local real estate market is recovering, but inventory remains historically low, and the factors creating low inventory and a surge in buyer interest are complicated. First, we must recognize that real estate is local. What applies in California may have no bearing on the market in North Carolina. And the market in Charlotte, NC, may have no bearing on the market along the Crystal Coast. And that is why, If you want to purchase real estate on or around the North Carolina Outer Banks, you must hit that subscribe button.
That being said, here are some reasons behind the historically low housing inventory here along the Crystal Coast, specifically in North Carolina in general. First, all of North Carolina is viewed as an inbound state. Over 60% of the people who move to North Carolina annually stay here permanently. My wife and I are among them. We moved here in 1984 after living in Philadelphia and on Long Island. We had no expectations of remaining here for the balance of our lives, but we have. We found North Carolina a great place to start a business, raise children, and enjoy life. North Carolina is a Variety Vacation Land from the mountains to the sea. We weren’t the only people to make those discoveries, which may explain why the population of North Carolina more than doubled from five million to over ten million over that time.
Second, thousands of homeowners in North Carolina have mortgage rates locked in at historically low rates. You can feel lucky if you bought a house or refinanced your mortgage in the decade leading up to the spring of 2022. Mortgage rates were often below 4% and reached an all-time low of 2.65% in January 2021. Then came inflation, and rates rose to over 7%. In the world of mortgages, that’s a gigantic difference, so it's not surprising that homeowners are reluctant to sell and look for and buy another home with a higher balance and mortgage rate. Take, for example, a couple with two children. They purchased a three-bedroom home back in 2020, right before the pandemic. They got a great price under $400,000 and a great rate under 3%. Three years later, both husband and wife work from home and need additional space for their respective workspaces. If they want to find a bigger home, prices will be higher and mortgage rates will be about double. No matter what they put down, the monthly mortgage payment will increase, and so the family decides to make do with what they have. And this is a discussion many families across North Carolina are having right now.
Third, we have had an explosion of institutional investors, including universities and churches, looking to invest excess cash. Until recently, the stock market has been a disappointment, so these institutional investors put their money in real estate to the point that they now own 24% of all single-family homes, up from 15% just a year ago and they own 25% of all apartment complexes, too. Fourth, fewer new homes are being built partly because there is less developable land, land that is appropriately zoned and has access to all necessary utilities, and publicly dedicated streets. That’s a big issue in Carteret County, where I live. Carteret County is the third largest county in North Carolina by area, but fully 60% of the county is water. That is one reason. The COVID pandemic, ignored by Donald Trump, disrupted supply chains severely, and these supply chains are just now showing signs of recovery, and this has impacted virtually all construction projects. And nearly every builder cannot find enough skilled craftsmen to meet demand. of course, this labor shortage has been going on for years. My general contractor stayed on the job site while masons laid all the bricks on our home. I asked why, and he said, “If I leave this job site, another contractor will come by and steal my masons.” And this was in the late 1990s! And, if that wasn’t enough to keep builders from putting hammer to nail, consider this: the builder has to buy the land. The builder has to pay for surveys, plats, roads, curbs, and gutters. The builder has to pay for supplies, pay the workers, and construct the house up from the ground. The builder is taking all the risk and will not see any return on investment until the first house is sold, and most builders/developers don’t see any profit until at least 90% of the lots and homes have been sold.
A fifth reason, which I touched on briefly above, is remote working. Many people could work anywhere during and after the pandemic as long as they had access to fast internet. Really? Do you mean I can live at the coast and still clock my 40 hours? More space for my family, a yard for the dog, great schools for the kids, and minutes from the ocean, sounds, and lakes for all my toys? Sign me up! Many employees from the Research Triangle did just that, which is why so few homes are currently on the market along the Crystal Coast. A sixth reason is that older Americans have decided to age in place. This is a particularly popular decision among mature residents in North Carolina, generally, and along the Crystal Coast. Older residents have decided the grass is not greener on the other side of the fence. Who needs Florida with its ungodly high heat and humidity nine months out of the year or Del Webb and The Villages with all their HOAs, rules, and right-wing politics? And then there are the longevity studies demonstrating that checking into one of these retirement communities takes five years off your lifespan.
The six reasons I raise in this article do not have easy solutions. It's not much to hang a hat on, but the real estate industry drives the American economy, and we have another major election in November 2024. You, the people, have the power to elect representatives in Congress and the Executive branches of our government who will do the right thing to make housing more affordable and available to all Americans. Homes and housing are problems on the order of the Interstate Highway. These are problems that require a government to come up with a solution. Chose wisely. Thanks for making Emerald Isle Vacation Home Specialist your first read of the day and if you subscribe and drop an email address in the comments below, I’ll send you my e-book, “Live Where You Vacation,” all about the North Carolina Outer Banks, Bogue Banks, Emerald Isle, the Crystal Coast, and Down East. Be safe and have fun, and I will see you next week. Thank you so much.
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