Hilton Head / Bluffton Real Estate Market Analysis | 2023 Edition
Real Estate Market Analysis | 2023 Edition
In this Market Analysis, you’ll find:
- A Video Summary of the 2022 Market
- Market Wrap-Up and Insights
- What’s Great in the Lowcountry
- Steering Factors for the 2023 Housing Market
Market Wrap-Up and Insights
by Chip Collins
Much like we saw in 2020 (at the front end of the COVID market), 2022 (at the back end of the COVID market) was a tale of two very different markets….
The first half of the year was marked by robust sales, limited inventory, strong demand, impressive price premiums, bidding wars, and the like…. Meanwhile, the second half of the year took on a new shape, framed with a growth in inventory, a sharp jump in interest rates, a reduction in sales activity, and a cooling down in pricing.
When pulling the two halves of the year together, the overall performance marked an impressive year for the market, including the following highlights:
The Averages Sales Price of homes and villas sold in 2022 jumped 14% over 2021, which in itself was a record year for appreciation!
The Average Days on Market came in at 111 days, with Homes ringing in at 124, while Villas moved even more swiftly at an average of only 68 days on market!
53% of Homes Sold in 2022 we’re on the market for less than a week!
As a testament to the strong buyer demand, low inventory, and prevalence of multiple-offer scenarios (especially in the first half of the year), it’s impressive to report that the Average Sales Price/List Price ratio for all of 2022 came in at 99.6%, which was actually UP from 99.2% in 2021!
While the number of New Listings to hit the market dropped 9.7%, the available Inventory actively listed for sale at the end of December was up an impressive 89% from one year prior!
Recalling that 2021 was a record year for sales in all accounts, it’s no surprise that 2022 was unable to fully keep up….and, as such, Pending Sales dropped 24% from the prior year, while Closed Sales dropped 21% from the peak in 2021.
Looking back, here are the stories that shaped the shifting market in 2022:
- Interest Rates and their quick jump from roughly 3% to 6% during the spring of 2022, caused a nationwide slowdown in real estate that ultimately cooled our local market in the second half of the year. This sharp increase in rates impacted not only potential buyers but also served as somewhat of an anchor for potential sellers who were hesitant to give up their existing attractive, lower interest rate. Coming into 2023, we’ve already seen a sizable drop in interest rates to below 6%, and we’ve heard projections that they may dip back under 5% by mid-year, which is very encouraging news!!
- Buyers regained some leverage as transactions became more balanced toward the end of the year. While prices/values held fairly strong, buyers and sellers agreed to terms that more commonly describe a “normal” market, including inspections/repairs, financing contingencies, reasonable due diligence, and the like. We’re expecting this trend to continue into 2023, even though we acknowledge that the days of multiple-offer sales are far from over.
- Traditional local market trends began to re-emerge, especially with regard to market “distraction.” Summertime vacations, back-to-school, and especially the year-end holidays drew attention away from real estate sales for buyers, sellers, and even agents alike. Notably, pending sales in December alone were down 32% from December 2021, which was a time on the market when the feeding frenzy never came up for air.
So, that’s the 2022 market in a nutshell, and, of course, we’ve got all the details on what happened neighborhood-by-neighborhood in our comprehensive online report, which you can view here.
As always, thank you for your interest in our market insights, and here’s wishing you a wonderful year ahead in 2023!
What’s Great in the Lowcountry?
Collins Group Realty’s Real Estate Specialists weigh in on their notables and favorites from this past year…
“The secret is out… Palmetto Hall has beach access through a resident’s gate, it’s a few minutes drive via golf cart to Fish Haul Beach.” – Andrea Albright
“Hampton Lake has several USTA tennis leagues and four groomed clay courts for play. League play includes communities in the Bluffton/Beaufort/HHI area. Come join in the fun!” – Kristen Parson
“The Dolphin Head Recreation Renovation Project in Hilton Head Plantation is underway! This exciting project includes a new playground, pavilion, event lawn, grilling area, multi-sport court, and improved access to Pine Island.” – Lori Cohen
“Rose Dhu Creek finished construction on a new dock on Miller’s Pond. It’s been fun to go fishing with my kids and take in some sunsets as a family.” – Brandon Stavola
“Pinecrest renovated our two tennis courts this year and added two pickleball courts alongside! A great new addition to the community” – Sara Loveys
“I am excited about the groundbreaking of Washington Square and the announcement that Palmetto Running Company will be opening a brand new Bluffton store at the Buckwalter location.” – Ryan Stefonick
“With a backdrop like a ‘Hallmark movie set,’ the Lowcountry is home to a myriad of Festivals each season – celebrating everything from Boiled Peanuts, to Oysters, to the Gullah Heritage, and all that makes this such a special place to live.” – Charlotte Main
“Workforce Housing has been a pressing topic for many years; but in 2022, the Town Council adopted a ‘Framework’ that pledges to partner with the Island community to ‘plan, manage and fund’ workforce housing initiatives. I love the hope this brings to folks who have had a hard time finding housing.” – Chris Sanders
“The outside public areas and landscaping of Hilton Head are always incredibly clean, trimmed, and neat which has a definite calming effect as you cross the bridges to the island. Removing the toll plaza in 2022 did wonders for cleaning up the approach to the island from the Cross Island Expressway.” – Carl Girth
“I am excited that in 2023 the RBC Heritage will be one of four PGA Tour events with an elevated purse of $20 million along with a commitment from the Tour’s top players to compete at this year’s event from April 10th thru 16th at Harbour Town Golf Course in Sea Pines.” – Howard Cohen
And speaking of golf… “All three 9-hole courses at Callawassie Island have been completely renovated as well as the addition of a new driving range.” – Fred Hogshead
“Cheaper than owning a boat, I joined Freedom Boat Club. 53 boats to choose from daily on the Island. 203 locations in US and Europe that you can use as a member. Less than a golf membership… I am a HAPPY CHAPPY!” – Jon Haldane
“I just love all the opportunities we have for waterfront dining. It’s a breeze to jump in the boat for happy hour at the new Quarterdeck, or a number of other restaurants.” – Kathy Fotia
“Just this past year, my good running friend Michael Withrow (along with his brother/partner in Island Head) began offering daily round trip boat rides to Daufuskie Island to experience the island’s rich history, beautiful beaches, and unique charm for the day. Check out their schedule to book your next Daufuskie Island experience at islandheadhhi.com” – Chip Collins
“I’m always excited to check in on the Hilton Head Island Land Trust Raptor Cam online. This January, a pair of Great Horned Owls have been frequent visitors to the next and appear to have taken it over. It was previously used for nesting by eagles, Mitch, and Harriet.” – Joan Weaver
“My idea of a perfect night out is playing pickleball mixed doubles with friends at one of Palmetto Dunes’ 24 public pickleball courts and then heading out for a casual dinner.” – Jeff Wynne
“Did you know… There is a 3.4-mile-long hiking trail in Bluffton? The New River Linear Trail offers peaceful views of marshlands and woodlands and an abundance of wildlife. It is one of my favorite spots!” – Bill Weis
2023 Real Estate Steering Factors
In the spring of 2022, newly listed inventory was beginning to climb, causing some buyers and market analysts to speculate that we might see a sharp spike in inventory as the hot market began to cool. However, continued strong buyer demand absorbed the best opportunities in that new wave of listings, leaving only those new listings that were over-priced or in non-premium condition to add to the longer-term inventory. Fast forwarding to the start of 2023, we see a much higher active inventory than a year before, but there’s only a trickle of NEW listings coming on the market. Owner property retention is at an all-time high as many owners are seemingly satisfied with their properties, compelled by their low-interest-rate loans, and confident in the stability of property values in the Lowcountry. The net effect is a continued seller’s market amid low inventory and steady demand, and we’ll be watching closely what happens this Spring when we historically see an increase in listings hit the market.
For the second year in a row, in 2022 Collins Group Realty ushered in buyers from 30 different states, deeply diluting the long-standing joke that everyone comes from Ohio. 2023 has started off with not only a steady stream of NEW buyer interest, but we’ve also seen that the new year has clicked existing prospects into a new gear, and post-holiday market activity has sprung into full swing. The Lowcountry has received a tremendous amount of positive press over the past several years, earning accolades for the ‘best town,’ ‘best beach,’ ‘best vacation spot,’ etc., and we are fielding more and more inquiries from folks who are just hearing about our area recently. And, as always, the rule that “friends follow friends” has never been more at play than in the wake of the record-setting market we just experienced.
Punctuated by the unprecedented rains out West and the deadly snow storms up North this winter, we suspect that already-established migration trends from those locations into the southeast will gain momentum in 2023. Time and time again when we interview people who have moved to this area, we hear how the Lowcountry is distinctive (if not altogether unique), given its moderate seasonal changes, its year-round outdoor offerings, and its predictable climate. If the southeast is the primary target for buyers in this new year, we believe the expanding Lowcountry is in the cross-hairs.
From 2020-2022 and from coast to coast in the US, the real estate market reflected pretty much one distinct color: red hot! But as interest rates increased in the first half of 2022 and as buyers backed away from paying ultra-premium prices, the color (or mood) of different markets began to change and vary from one another….thus, pixelization began. We expect that this variation will become increasingly evident from market segment to market segment, both nationally and locally. Sub-factors such as affordability, taxes, insurance, rentability, POA dues/offerings, density, traffic, property condition/age/updates, and many others are likely to serve as the basis for greater buyer discrimination in the coming year.
Due to inflation, rising interest rates, and skyrocketing property values and long-term rental rates over the past few years, housing affordability in the Lowcountry is a real problem. In a market area so dependent upon tourism, the continued shortage of available employees is already having a negative impact on many businesses, resulting in limited hours/days of operation, services, etc. The Lowcountry is having to play “catch-up” on this issue as it works to create and facilitate near and long-term solutions, and we’ll all be watching closely to see what steps may unfold, including the news in early 2023 about some exciting office-to-residential conversion opportunities on the south end of Hilton Head!
RETURN TO NORMALCY
While we expect 2023 to technically remain a seller’s market (i.e., under a 3-month supply of inventory), we are already seeing transactions that are more evenly keeled for both sellers and buyers. Financing contingencies, inspection provisions, price negotiations, and other moderate terms are now more commonplace… As values appear to be holding fairly well, buyers are expecting to regain some leverage, invoking more balanced terms, reasonable property conditions, and the opportunity to perform due diligence before proceeding. Meanwhile, flexible closing terms, leaseback opportunities for sellers, and multiple offers are still occurring with some frequency in the overall market.
RENT VS. BUY
This long-lived debate that most of us have faced at one time or another – especially at the time of considering the purchase of your first home – is really quite challenging at the moment. The “perfect storm” is at hand with high-interest rates, high rental rates, and high resale values, making the decision a tough one no matter what. Expanded lending options have emerged over the past year, which are helping tip the scale toward buying for those who qualify and who would rather see their monthly payments work toward their own equity growth. Until/unless rental rates settle/stabilize, we expect to see the pendulum swing toward buying vs renting. With some 55 million people currently comprising the 28 to 38-year-old demographic, we know the rent vs. buy debate is a lively one across the country.
An obvious factor when it comes to any real estate market, money promises to be a particularly impactful steering factor this year. The stock market has finally shown its other face, which has sent investors (once again) back into real estate as a diversified investment avenue. Plus, as baby boomers are poised to conduct the greatest wealth transfer ever (some $68 Trillion!), we fully expect to see a continuation of impressive cash-purchase transactions, especially as we attract buyers from higher-average-sales-price markets that make the Lowcountry a strong relative-value. Meanwhile, mortgage money is readily available as lenders (especially our LOCAL lenders) are getting creative and aggressive in their programs to help offset the rise in rates we saw develop last year.
THE RIPPLE AND THE BUBBLE
It’s pretty well established that not much that happens in our local market causes a ripple effect in the national market. Quite the opposite, we have more often felt the effects when markets elsewhere (especially our feeder markets) experience substantial change. As the sense of wealth and equity has grown for those who enjoy the Lowcountry, our market has grown as a result. And, in times (like 2008) when financial insecurity has taken hold, we’ve suffered from that decline. Yet, given the significant growth in our year-round population, the expansion of our market area, and the more dynamic nature of our local economy, it’s possible that we may be building somewhat of a protective bubble around our market, making us less vulnerable to the ripple effect that has previously and so significantly impacted our market demand and values. The Lowcountry is coming into its own, and it’s exciting for all of us to be a part of that!
Go to the December 2022 Market Report