Driving the beach road near sunrise, you see dozens of surf shop sticker covered SUVs packing a beach access. “Must be surf,“ you think, “but how did they know?“

There’s no secret code sent out, after studying the ocean, weather and local landscape, they know.

Much like how surfers benefit from knowing the local breaks and shifting winds, succeeding in our local economy takes a certain amount of knowledge and experience, combined with an acceptance of unpredictability, and a commitment to preparedness.

The economic wave the Outer Banks has been on for the past few years has been equivalent to “double overhead,“ a challenging but impressive swell of double digit percentages in revenue growth across occupancy, meals and real estate sectors. Largely driven by pandemic demand, low numbers from 2020 based restrictions, and increased flexibility in work from home and schooling options, 2021 had a 31.41%, 33.78%, and 51.11% increase year over year in retail, occupancy and meals revenue respectively. Residential and other real estate sales also crested to a 70%/79% YOY increase in 2021.

As pandemic effects ebbed in 2022, the Outer Banks experienced a more traditionally distributed visitation season. With some “off season“ months falling back to 2019-like numbers, year to year decreases showed up in double digit percentages. December of 2021, for instance vs 2022 saw the most significant difference, a drop of 43.6% in occupancy collections. However, significant rises during spring and fall break weeks and summer months, combined with the incredible retail and occupancy numbers in January, led to an overall 5.67% average increase in meals, occupancy and retail.

The housing market is also seeing returns to more moderate levels, which is seen with the 19% residential sales decrease in 2022 and a 42% drop as of this February. Also, the average residential sale price has dropped to 470k as of February of 2023 from a high of 570k in 2022. For reference, the average sold home was 450k in 2021, a 36% increase over 2020.

Like waves, though, bigger is not always better, and riding this economic swell has been challenging for even the most experienced and successful. Long time local businesses cut hours and even closed for multiple days each week. Restaurant services like take-out and delivery were limited or eliminated, and finding a reservation or avoiding long waits became a challenge. Store lines and traffic backups crawled endlessly through the season. Even Lee Nettles, Executive Director of the Outer Banks Visitors Bureau, admitted the growth was not sustainable.

The scorching real estate market burnt even lifetime locals who found themselves scrambling to find places as seemingly every long term rental house was being converted to short term rental or sold above list. Local renters who planned to buy in the future found their formerly generous loan preapproval barely able to buy a place further and smaller than they were renting. Short term rental income potential, with nightly rates for even basic homes matching hotel prices, along with increases in ownership costs, made choosing to offer long term rental a difficult financial decision. Evidenced by the huge increase of 86% and 40% in 2021 and 2022 in the “other rental homes“ category on the Outer Banks Visitors Bureau’s statistics, privately managed short term rentals are still on the rise. Low inventory, high demand, and increased costs, pushed many of those remaining long term rental prices beyond the reach of most service and essential worker residents. Losing these residents puts even more pressure on local infrastructure and businesses, not to mention the loss of community.

This long-term issue is being addressed, though, as Dare County Commissioner Bob Woodard stated that affordable housing was a top priority during his State of the County presentation. Currently there are multiple public/private partnership projects with developers Woda Cooper Companies and Affordable Coastal Housing LLC planned, but it will take time for them to be added to available inventory. With inflation’s effect on wholesale prices, rent and ownership cost increases, and the need to pay higher wages to retain and attract employees, prices have crept up across the board. Experts agree that it is partially due to these price increases that our economic numbers have continued to rise, though there are no locally available year over year number aggregates which have a control for price increases.

These factors are not specific to the Outer Banks though, as across the country, struggles with workforce housing and staffing procurement continue to put pressure on service and tourism sectors. Combined with the overall economic slowdown, we are nearing what seems the bottom turn of this current wave. With this much chop in the economic waters, how do you choose a board or whether to even paddle out? Can we plan for future swells and lulls so we aren’t caught inside the financial surf break?

Currently efforts are being made by local governments and tourism organizations to come out of this set nose riding a longboard of sustainable growth. Jim Kleckley, PhD, Director, Bureau of Business Research at ECU expects a 4-5% growth for 2023. So, while the issues mentioned will persist, the increase should be more manageable, as businesses have started to adapt to the new volume that began in 2020 and people figure out how to find housing.
The Outer Banks has never been a wave pool, we’re the Graveyard of the Atlantic, but those that negotiate the shoals are well rewarded. So while the economic waters may be a little chillier in 2023, there’s still plenty of surf out there.

Author: Jes Gray