November 2020

Don't Fear the Boom: 2020 has been a bit of a nightmare. Just don’t tell that to our local real estate market, where we’re waking up to unprecedented success.

Author: Barry Kaufman

In the real estate world, there’s a certain hesitance to use the word “boom.” A decade since the housing bubble burst, lingering memories remain of the downward spiral that followed the dizzying heights of the early 2000s. For every boom, it stands to reason, there must be a bust.

But looking around, it’s hard not to use the word boom.

“In my 43 years in real estate, I’ve never seen anything like this,” Phil Schembra, owner of Schembra Real Estate Group said. “We’re seeing an unprecedented amount of interest.”

Specializing only in Palmetto Dunes, Shelter Cove and Leamington, where average home prices are the highest they’ve been in a decade, Schembra has personally sold more than $90 million in real estate this year.
And that’s just in three neighborhoods. Expand the focus and you see that, from the farthest points of Bluffton to the toe heel of Sea Pines, real estate is officially, to chance fate, booming.

“Since May 1, the market is better than I’ve seen it since 2005,” Charter One Realty co-founder James Wedgeworth said. “We’ve been undervalued for a long time. I think buyers are figuring out we’re an excellent value because we had not rebounded from the ’08 crash.”

While Hilton Head Island may have lagged behind other resort areas in bringing average prices back up to pre-recession pricing, that is quickly changing. The Hilton Head Area Association of Realtors’ September 2020 overview, based on data from Hilton Head MLS, paints an astounding picture. The number of closings in September 2020 is nearly 65 percent higher than September 2019. Looking at that same time period, we see that the average price jumped 31 percent.

“These numbers are just astronomical,” Jean Beck, HHAAOR president said.

And while many factors are behind this incredible growth, given the timing of it all, one must point out the elephant in the room.

“Obviously this was driven by COVID,” Wedgeworth said. “The whole world feels safe on Hilton Head Island. No subway, no mass transit, no elevators … just a lot of open space.”

Spurred on by an urgent desire to escape the cramped confines of the northeast, buyers are fleeing to the social distancing that comes naturally here. It’s a phenomenon that has been building for years but one that kicked into high gear as the pandemic turned density into danger.

“Migration out of cities is nothing new. It’s been a trend that’s been going on for some time,” Tom Reed, broker-in-charge at The Reed Team said. “But what’s happened is, the shutdown due to coronavirus and the social unrest have caused an acceleration of that migration. And that is contributing.”

It’s massive contributing factor, but it’s not the only thing driving this massive growth. Another is the low cost of living that has long been a hallmark of South Carolina, which has become increasingly attractive for buyers now accustomed to working remotely.

“Buyers are making a mass exodus out of expensive cities and states that are draining them of their earnings and incomes,” Heather Nix with Alliance Group Realty said. “Why pay the high costs of living and contend with harsh weather conditions when you can work from home on your laptop under a shady oak tree draped with Spanish moss? It’s a no brainer.”

Like the migration from cities that was already well underway before COVID, the rise of the work-from-home professional had already been a driver in Lowcountry real estate. It simply accelerated as the entire country realized they could work from home.

“A lot of professionals have come here looking to experience a better quality of life and more family enjoyment while still growing in their careers,” Schembra added. “And when you factor in the convenience of two airports nearby for business travel, it becomes that much more attractive.”

The mobile workforce has even strengthened the market for second homes, long a staple of the local market. “People are buying these second homes because they realize they can take a month or 6-8 weeks and work from home while their kids are out of school,” Beck said. “They’re able to use it more and spend more time enjoying it.”

It may trigger memories of 2008, but it’s hard not call it a boom. As for the bust, it’s important to realize that this boom is not the boom of 20 years ago. It’s not spurred on by artificial manipulation on the part of banks. There’s no mortgage crisis waiting in the wings to tank the market.

“The difference is that the fundamentals in the economy are different,” Reed said. “Also, keep in mind that our area attracts wealthier clients. [Hilton Head’s] client base is less susceptible to swings in the economy. Looking at the numbers at the moment, there’s no sign of any slowing down.”

“I couldn’t even begin to speculate what’s going to happen with the housing market in the months/year to come,” Nix said. “But for now, it’s incredibly exciting to be in this business.”

If there is a problem that could come from such unprecedented success, it’s that we’re running out of homes, lots and condos to sell. The HHAAOR September report shows a current total inventory of 1,464 properties to sell, a nearly 34 percent drop since September of 2019.

“I’m running out of inventory,” Schembra said. Looking at his numbers shows that last year in Palmetto Dunes, Shelter Cove and Leamington, there were 173 properties between homes, villas and homesites. As of this writing, he had 63. “It’s great because it gives sellers leverage to raise prices, so it’s a good problem to have.”

While the lack of inventory might be a cloud on the horizon, it’s more or less the only one. The deeper you look, the less this looks like 2008. The factors behind this boom had already been in play before the pandemic. The Lowcountry’s quality of life, low cost of living and natural beauty was already driving steady growth. This pandemic just put the pedal down a little harder.

Knowing all of that, we can breathe easily as we call this what it is: a boom.

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