Last night we rolled back into town after spending a week at the beach in Corolla, North Carolina.  Corolla is part of the northernmost developed stretch of the Outer Banks (OBX) and is very popular with folks from Washington, DC and points north.  Most of this area has been developed only in the last 20 years and judging from the traffic on Rt. 12 it doesn’t look like the area can handle much more, but that may not be an issue at least for the short term.

Now that the real estate market in the US is cooling down it will be interesting to see what happens to places like Corolla because I can’t imagine that the current situation can be sustained for much longer.  We saw one 1/2 acre empty beachfront lot next to the beach access we were using that was selling for over $2 million.  That’s just for land.  Across the street from that lot was another that was selling for $800,000.  The houses in that area are built so that multiple families can share the space which means they usually have enough sleeping capacity for 30 people and you aren’t going to build a house that size for much less than $500,000. If you’re spending $1 million for land and another $500,000 or more to build a house then you’re looking at $1.5 million minimum to get into that market.  We (our friends and ourselves) were speculating that over the last 10 years people in the northeast have been leveraging the skyrocketing value of their primary residences in places like the DC metro area to finance their beachside McMansions in OBX.  With those markets now hitting the skids there will probably be a corresponding slow down in places like OBX.

As I’ve written before I’m no economist, thus it’s dangerous for me to write about things like this, but I just can’t see how the current situation in OBX can be sustained.  I guess I’ll just have to sit back and wait for folks like my brother and David Boyd to come embarass me with obvious arguments for how it can.