The following analysis is for homes on Hilton Head Island only. It does not account for villas or lots. The information is based on new listings that appear during the specific research period and what happens to them. It does not account for pre-existing inventory that slides from one period to the next. The research periods are from January 1 to October 21, 2012 through 2014. For example, 650 homes have sold on the island this year, but only 342 were listed since the beginning of the year. This means 308 of those sales were listed before 2014 began.
What is the current state of the real estate market on Hilton Head Island? You might find the answers surprising.
With a few exceptions, home values on Hilton Head Island have remained relatively flat over the last 24-months, while the number of sales has slowed by 10% when comparing this year to last. In light of such a trend you would expect that asking prices would also remain the same, staying consistent with consumer demand, but that is not the case.
In 2012 the average asking price of homes that were listed for sale between January 1 and October 21 was $795,547. During the same time in 2013 it jumped to $829,398 and this year the average asking price for new listings is $846,960. That’s an increase of 6.5%.
At the same time the average selling price of a home on the island has barely changed in 36 months; in 2012 the average selling price was $604,577 and this year it is $609,929. Last year it was $594,647. What’s interesting is that the average list price of the homes that are selling has also remained consistent, too. In 2012 the average list price of a home that came on the market and sold was $648,126. The average list price of homes selling this year is $654,190.
So what’s happening to the inventory that falls outside this trend? It is lingering and probably contributing to what might best be described as a slack market.
The condition of the distressed sales market makes the current state of affairs even more odd. One would assume that as the chaff is cleared from the market, values would gain momentum. But that just hasn’t been the case.
Foreclosures and short sales, as a percentage of market activity, have dropped dramatically in just three years – from 22.6% in 2012, to 13.7% in 2013, to 6.7% this year. The height of distressed sales was 2010 when 27.8% of all sales were a foreclosure or short sale.
With that kind of dynamic at work you would expect values to show more improvement than they have, but they haven’t. Why? It is apparent that there is still an ample supply of motivated sellers to service buyer demand and there is no evidence that buyer demand is increasing. This, coupled with an uptick in new listings, has put a stall on the hopes of appreciation.
The message is that while things are better than they were in 2008 through 2011, they are not improved enough to warrant the apparent direction of increased asking prices. In the past, appreciation has occurred when absorption rates, (i.e., the number of new listings being purchased on a yearly basis), are well over 80%. The absorption rate this year and last is just about 60%.
To put that into perspective, the absorption rate for new listings in 2006 was 93.5%. The appreciation rate over 2005 was 7%. The absorption rate for new listings in 2008 was 20.1%. Values depreciated 16.75% from 2007.
Again, over-valued listings do impact the market and contribute to an overall impression of malaise when buyers come to the island in search of property. Today’s buyer is not that much different than the ones that helped us climb out of the bottom of the market – they are cautious, well-informed and only willing to act when they perceive that they are spending their money wisely.