Foreclosures and short sales have definitely affected our market here on Hilton Head Island and Bluffton, but a preponderance of sellers has had as much to do with sliding prices as any other factor. 

Compare this morning’s statistics with a blog that I posted on Monday, July 20, 2009 at 8 a.m. In that blog I showed you how annual sales of homes have fared over the last nine years. Today’s statistics show you how many new listings have come to the market during the same time frame. In 2001 and 2002, when we were working our way out of a recession and the effects of the terrorist attacks, the Absorption Rate (# of properties listed for sale divided by # of sales in the same time frame = Absorption Rate) was 51.7% and 93.1%, respectively. This year we’ve sold more houses than in 2001 (659 vs. 643) and in 2008 more houses than in 2002 (852 vs. 764). However, the Absorption Rate for 2008 was an abysmal 36.3% and this year it is 33.8%. The result is exactly what you might think. From 2000 to 2001 the average sales price of a home slipped by less than 4% and quickly rebounded in 2002. Conversely, our average sales price fell a staggering 31.4% from 2007 to 2008 and has actually stabilized in the first half of 2009. As strange as this might sound, the stabilization of values is because of the foreclosure and short sale market on Hilton Head Island and in Bluffton. The financially distressed properties now constitute between 35% and 40% of our activity, which means they are establishing market value. The bad news is that this doesn’t help folks who bought in 2004 to 2007, but the good news is that the banks are establishing market lows and those values are very consistent. With all of this in mind, you can bet that when the Absorption Rate starts to increase a recovery in the real estate market will be right behind. That will happen for one of two reasons - more sales or fewer listings.

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