Reflections and Predictions
In 2022 our market underwent a major shift, especially in the last half, as economic uncertainty and higher mortgage rates reduced buyer demand, slowed the pace of home sales, and softened home prices. Prior to the almost-sudden change, the red-hot housing market of the past 2 ½ years was characterized by sub-three percent mortgage rates, fast-paced bidding wars and record-low inventory. Current market conditions have provided us an opportunity to become re-educated about what a ‘typical’ housing market looks like. While 2022 may be remembered as a year of housing volatility, 2023 will most likely become a year of long-lost normalcy returning to the market. Mortgage rates are expected to stabilize while home sales and prices moderate after recent highs.
Buyers will not face the extreme competition that was commonplace over the past few years. The housing market, once adjusted to the new normal of higher mortgage rates, will benefit from continued strong demographic-driven demand relative to an overall, long-running shortage of supply. Sellers are choosing not to trade up or sell and take on new mortgages, as they could end up with rates 2-3% points higher than the ones they have now. This should protect home prices from falling. Relatively, we expect inventory levels in Sea Pines to remain low, as the demand fueled by demographics and the after-effects of the Pandemic continue.
The Great Reset
2023 will bring lots of variability in how housing markets adjust, according to Bright MLS Chief Economist, Lisa Sturtevant. There will be a lot of resetting expectations for both buyers and sellers. There will be variations from market to market, and in different price ranges. MLS data shows 40% of sellers have adjusted their home price downward or offered concessions. This period of acceptance will take some time. Sellers will need to process all of this, and that is underway now. It’ll take time, probably into the first quarter of next year, to fully digest the “new normal.” Regardless, prices will still remain above 2019 levels.
The local Hilton Head Association of Realtors and MLS report market wide the inventory levels are up 88.6% with the largest gain in the Single Family segment (up 99%). That conveys into 2.1 months’ supply for homes and 1.9 months’ supply for condos/villas. Reminder: a normalized market is 5-6 months’ supply. There has been a 15% increase in median price for SFH (homes) for 2022 and 20% increase for condos/villas for the year. However; pending sales in the Hilton Head region is down 24.1% overall, and we are seeing more and more buyer incentives in the form of concessions and price reductions. Turnkey properties remain in high demand; outpacing supply, which puts pressure on asking prices for “fixer-uppers.” If sales continue to slow, and inventory increases; housing prices will soften over the next 12 months. Good News; forecasters do expect the Federal Reserve will end its path of rate increases at the end of the first quarter; which should lead to sustainable declines for mortgage rates in the second half of 2023 and into 2024.
We encourage you to keep the perspective that, even if prices do come down a bit, we are way ahead of where we were prior to the pandemic. If you’re looking to buy or sell a home this year, the best way to ensure you’re up to date on the latest market insights is to partner with a trusted real estate advisor who has longevity and a track record of success in both up and down markets. Becky Herman and Monica Davis, along with the power and resources of Charter One Realty, an iconic market leader in the Hilton Head Area, and their affiliation with three top luxury real estate networks, will be able provide you with a unique perspective and advice that will serve you well. Call them for a confidential consultation and market evaluation related to your property!