At the north end of the coast, years of double-digit appreciation and booms in speculation and in giant, multimillion-dollar rental houses have ended. In April and May, the number of existing homes sold on the Outer Banks plummeted by more than half compared with the same months last year, according to data kept by the N.C. Association of Realtors.

On the southernmost stretch of coast, sales in Brunswick County have dropped about the same amount. In Carteret County on the central coast, the 15 percent fall in May and the 34 percent drop in April look cheerful by comparison. But according to locally compiled statistics, sales on Emerald Isle are down more than 60 percent.

"It was a seller's market for ... four or five years, but it's in transition now to a buyer's market," said Mark Petty, a broker with Village Realty in Nags Head.

Marcia Parrott, a broker in the same office, has seen downturns before. But, like the thousands of others who make their living from Outer Banks real estate, she can't help but wonder what's happening.

"Are we in a correction?" she said. "Are we -- I hesitate to use the word 'collapse' -- totally falling apart? Or are we having a soft landing, which is what I heard someone say the other day."

Real estate on North Carolina's inland coast -- the sounds, rivers and estuaries -- is exploding. But Parrott's best guess is that the falloff in Outer Banks property is a correction. She said it was overdue, given the number of speculative houses that builders and developers put on the market, and the number of investors who jumped for quick profits after years of 15 to 20 percent annual increases in home values in some parts of the Outer Banks.

"Our prices went up too fast and too high," she said. "We needed this."

Their company had begun advising some clients not to sell without a pressing reason but to wait for a better market.

Buyers wise up

Prospective buyers have caught on to the downturn and are routinely offering 10 to 15 percent below asking price, even though they know the seller has already dropped his price, sometimes more than once. In one recent case, Petty said, a potential buyer even offered less than a previous offer, apparently betting that the first potential buyer would walk away.

Many sellers have resisted lower prices, but Petty thinks prices will fall to what they were a couple of years ago before they start up again.

Homes in the $500,000-and-under range are still selling, he said, but there's a glut of oceanfront homes. In some cases, speculators who had hoped to "flip" a property -- sell it for a quick profit -- have been left with one worth less than they paid.

Bernard Helm, president of Market Opportunity Research Enterprises, a Rocky Mount firm that tracks residential trends, said that the hot market in recent years was due not just to demand but to the low cost of borrowing, with interest rates low and lenders eager. Interest rates have risen in recent months.

Timothy D. Kent, executive vice president of the N.C. Association of Realtors, agreed that rising interest rates are dampening "sales exuberance" along parts of the coast. Contributing causes vary, though, he said.

Soft markets in the places where many Outer Banks buyers are from -- such as northern Virginia and the Northeast -- are partly to blame. "They may be more aware of changes in real estate conditions than we are in North Carolina," Kent said. "They may be feeling the pinch in their own areas that we aren't here, where the market is generally strong."

In Brunswick County, by contrast, new construction is competing with existing homes, he said. The average sales price there was up 37 percent in May, even though the number of existing homes sold was down 60 percent.

The opposite is the case on the Outer Banks, where the average home price fell 16 percent, or almost $100,000, in May, and sales were off 54 percent.

Wake-up call for some

Real estate is a huge industry on the Outer Banks. The downturn is hurting thousands of brokers, appraisers, builders, mortgage brokers and, indirectly, the rest of the local economy. When Petty got into the business a little over a decade ago, there were 400 to 500 brokers on the Outer Banks, he said. Now there are about 1,100, including many who haven't been in the business long and perhaps thought the market would always be booming.

"It's probably a rude awakening for them," he said.

John Hunter, an appraiser in Kill Devil Hills, said that in 26 years of valuing real estate from Ocracoke north to Virginia he has weathered at least three cycles in property values. This time, he said, the market has a better foundation to build on when it swings back because there are few buildable tracts of any size on the barrier islands, so supply will be tighter.

For now, though, he's seeing such things as a seller who turned down a $1.5 million offer a year ago accepting $1.2 million recently.

Income from summer rentals is important for many homeowners on the barrier islands. Hunter thinks the nature of the downturn will become clearer in the fall, once people who might have been thinking about bailing out ponder that long stretch of winter mortgage payments.

He, too, says people should hang on, for several reasons. Beach property is limited, a certain percentage of people will want to own a house there, and baby boomers are about to start retiring in large numbers.

"If you just wait until the next cycle, you'll be glad you did," he said.

Still, many on the beaches wonder when that cycle will come.

"If I knew that, I wouldn't be so worried," said Parrott, the real estate broker.

(Staff writer Jerry Allegood contributed to this report.)