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Hilton Head / Bluffton Real Estate Market Analysis | 2022 Edition

Hilton Head Island / Bluffton area annual real estate market report presented by Collins Group Realty.

This report covers an analysis of 2021 market activity and what we believe will be the steering factors for the 2022 real estate market.

We hope you enjoy it and invite you to comment below, share this report, and/or let us know if you have any questions.

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2021 By The Numbers

2021 is now in our rearview mirror, and it was a TRULY REMARKABLE year in real estate sales in the Lowcountry!

The big story of the year was inventory, as we expected it would be, and it’s still head-spinning to acknowledge that after the robust year of sales, inventory ended up down a full 50% as compared to one year ago!

At Collins Group Realty, we’ve been tracking the relationship between new listings and new sales ever since we recognized that things might be different when Covid first the area hit in Spring of 2020. As we all know, conditions in the market did change, first in a negative way, then in an unexpected and unprecedented positive way!

As the chart shows, there have been 3 distinct moments in recent market history, where supply (new listing inventory) and demand (new pending sales) crossed paths in the Lowcountry market.  

Preceding any sign of Covid, we were in a slowly-recovering market dating back into the bug bubble burst we saw in 2008/2009, but once we found our footing during the quarantine of Spring 2020, demand started to outpace supply, which lasted for a whole year until April 2021.

For the next 6 months or so, we saw supply slightly outpace demand, but it didn’t really feel that way in the day-to-day market.  In fact, right in the middle of that time period, we experienced a historic market event:

For closed sales in the month of June 2021, the average sales price to list price ratio was over 100%! Needless to say, no matter how long anyone’s been buying, selling, or brokering real estate in the area, this was unprecedented… and extremely telling of market conditions in 2021!

Not only did property sell close to, at, or quite often above list price throughout the year, but it sold fast. In fact, roughly 50% of homes and villas that sold in 2021 were on the market for a week or less! For those of us working in the market, we can recount many, many instances where the time on market was hours, not days. Here’s how this played out in the year-over-year stats for days on market (chart right)

When you add up low inventory + high demand + historic sales price/list price ratios + fast sales…. what do you get…?

Increased average and median sales prices!!

Market-wide, the Median (meaning, the middle of the dataset) sales price increased by almost 12% in 2021 over 2020. That’s pretty impressive when you consider that 2020 in itself posted a 12% gain over 2019!

Not to be outdone, the all-important Average Sales Price stat posted a roughly 20% gain over 2020, which, again, was the second year in a row for a 20% year-over-year climb! In short, 2021 was a great year to own (and sell and buy!) real estate!!

Big gains in the Average Sales Price stat in 2021 were driven in part by big gains in the high-dollar market segment… and nothing says high-dollar like oceanfront. 

Oceanfront sales across Hilton Head Island posted a record year in 2021. Consider these impressive stats for this niche of the market, and keep in mind that most of these sales were cash deals as you do:

  • The nearly $255 Million of oceanfront home sales in 2021 marked a notable 13% increase over that of 2020
  • While there were 16% more transactions along the beach in 2020, this was only due to the absorption of accumulated inventory leading up to that year. Note that in 2020, the average days on market for oceanfront home sales was 367 days; while in 2021, the average time it took to sell an oceanfront home dropped by 56% to just 160 days.
  • The most notable lingering stat from 2021 is that out of the 46 new oceanfront listings that hit the market in 2021, there is only one (1) that is still available for sale as of this Jan 20th report!

When a market heats up so quickly and so strongly like it has over the past one and a half years, it translates into some pretty interesting (and unprecedented) negotiations, strategies, and contract terms. Here are some of the more common tactics and aspects of offers/contracts we saw in 2021 as buyers did their best to “win” properties amid high demand and low inventory:

  • Cash deals (straight cash, or waived financing contingencies)
  • As-is offers (or waiver inspection contingencies)
  • Flexible Closing Dates and/or Post-Closing possession for sellers
  • Higher escrow deposits
  • Highest and best offer scenarios/deadlines
  • Site-unseen purchases or virtual showings 

2021 was a year in real estate like no other, posting a 28% gain in the total dollar volume of homes sold in the market area, and a 32% gain for villas. The biggest gains in unit sales took place in the first three quarters of the year, while 4th quarter started to slow, and we ended the year with a 7.4% year-over-year gain in closed sales compared to 2020.  

And, while it feels like NO ONE will really believe this statistic, the total number of New Listings in 2021 actually bested 2020 by 1.4%.

As we continue into 2022, the undeniable, #1 steering factor for the marker is (and will continue to be) INVENTORY.   Yet, there are other factors we are monitoring, which we think will have some bearing on the direction and tempo of the market in this new year, and we’ve shared those below for your contemplation…

2022 Real Estate Steering Factors

We’ve all heard (or said ourselves) the following: “I’d sell in a heartbeat, but then I’d have no place to go!” Such is the vicious cycle of our low inventory challenge, and we expect it to continue further into 2022. It would seemingly take some dramatic/significant event to turn content homeowners into sellers, and we do not have any basis to predict this happening anytime soon or in any dramatic fashion. As such, we expect inventory to remain low, which generally sets up to favor sellers for the foreseeable future.

The sharp spike in Omicron cases in January across the country (and Lowcountry, of course) caused widespread disruptions in the real estate cycle for the market kick-off in 2022. These disruptions are expected to be short-term, while the bigger factor is what we might see in early Spring. If COVID cases settle dramatically, we may arrive in a new era of confidence and enthusiasm that could fuel a new wave of buyer and seller activity. Conversely, others have renewed their own interest in calling the Lowcountry home, resulting in an increased level of property retention and a corresponding decreased level of property turnover. At the same time, rising property values, downsizing/simplifying, and general changes in housing needs are certain to fuel a much-needed level of new listings in the first two quarters of 2022. Therefore, inventory is shaping up to be the key steering factor in how the 2021 real estate market unfolds.

While we are not expecting any drastic increases in mortgage interest rates, we are pretty confident that rates will climb in 2022. In fact, indications here are the start of the year are that second home rates may experience a bump as early as April 2022. Since rates will still be historically low and extremely attractive, the challenge isn’t the rates themselves, rather the increase in rates as real estate values have climbed so significantly. The net-effect is reduced affordability as the borrowed-dollar doesn’t buy as much real estate as it once did, while some buyers (especially first-time homebuyers) need all the buying-power they can get.

Work From Home (WFH) is here to stay for a certain percentage/segment of companies, as workers desire autonomy, flexibility, and the opportunity to relocate to a more desirable location to meet their work obligations remotely. As such, we continue to see more and more people move to the Lowcountry where they can significantly enhance their quality of life (weather, natural amenities, year-round activities, etc.) in their WFH mode. This movement is additionally fueled by “life is short” and “why wait” mentalities that are compelling accelerated purchase timelines among those who may have been waiting to move upon retirement.

While we have all been impressed with the sharp increase in real estate values locally, we are not nearly unique in that vein as values have jumped dramatically across the country. The Hilton Head/Bluffton marketplace has long since been a relative “value” in comparison to other coastal communities, and it still is. We expect this to continue to drive additional interest among buyer prospects, especially those who are selling high in areas like New York and California, only to buy here in the Lowcountry, feeling like they hit the lottery.

The old adage of “what goes up must come down” has some homeowners wondering just how high values can realistically climb before they peak and perhaps begin to decline. Most folks like the idea of buying low and selling high, so we expect that some segment of owners will enter the marketplace this year amid concerns that values may be at, or near, the top. Meanwhile, other sellers are choosing to enter the market more so on an “opportunistic” basis…they’ll sell if, and only if, the market delivers a hefty price for their home. In either case, inventory is welcomed (and needed) in the coming months, and we expect sellers will continue to experience (and enjoy) a very favorable market for months to come.

Supply chain challenges, inflation, and labor shortages are just a few factors shaping the current cost of living, and it seems clear that these won’t be corrected in any short order. These directly impact not only our individual purchases and expenses, but also those of our service/maintenance/construction providers, who have no choice but to pass those costs along to the consumer, forcing the cost of home ownership to rise. Adding to this, on another front, we are watching with anticipation what the effect of Flood 2.0 (FEMA’s new flood insurance rating program starting with policies in 2022) will have on the cost of flood insurance in our area. In some cases, the premium increases will be significant, which could possibly sway buyer (and seller) decisions in the months and years ahead.