The Great Stall: 2015-?Read Now
Carpe diem is a Latin aphorism, usually translated "seize the day", taken from book 1 of the Roman poet Horace's work Odes (23 BC).
While the Hilton Head Island and Bluffton real estate markets have continued to see continual improvement for quite some time in the <$1M categories, the upper end market ($1M+) has had a more difficult time. This lends itself to the questions: 'What happened and why is this happening, particularly on Hilton Head Island?' and 'How does this effect you, as a buyer or seller of real estate in this category?'; i.e. how can you take advantage of the opportunity or seize the day.
The upper end home market ($1M+) has not rebounded the same way other segments of the market have. For example, homes <$1M have been selling on par, or better than years past yet the $1M+ has remained in a stall. Early theories on 'Why?' revolved around the secondary homeowner property tax structure (secondary homeowners pay 6% of the assesed value, instead of the 4% primary homeowners pay but the multiplier is higher for the secondary home and equates to a 2x-3x greater amount in property taxes than that of a primary home). This theory developed shortly after the credit crisis of 2008 where everyone was looking more closely at what their overall costs were and location was becoming less of a variable in the purchase decision. During this time, areas outside of Hilton Head Island started to see increases in sales and prices in the upper end category. Areas such as Destin, Florida have been experiencnig homes selling in the $5M+ range while the highest we have seeen of late is just shy of $4M. Recently, I have witnessed increasing sales and prices in places such as Palmetto Bluff (here locally) and Daniel Island, SC (just up the coast outside of Charleston).
SIDE NOTE: The common denominator with both Palmetto Bluff and Daniel Island is 1) the location of both are further from the beach than the developments they compete with. For Palmetto Bluff that would be Hilton Head Island and for Daniel Island it is Isle of Palms and Sullivan's Island. 2) Palmetto Bluff and Daniel Island both have newly built homes in newer communities that creates an exciting vibe while Hilton Head Island, Isle of Palms and Sullivan's Island are more established and have a deeper history.
The tax theory was supported when high end homes were selling in Florida, but with them selling in other communities in the HIlton Head Island and Bluffton areas the theory no longer held water. Palmetto Bluff and Daniel Island have been and continue to sell high end properties at a rate that outpaces other area communities.
The world we live in with advances in technology, has given a larger number of people the means to purchase upper end real estate. Cell phones and personal computers allow buyers to work abroad, meaning they can visit the island more often than years past. While they may be here, the amount of time they have to spend on various activities is limited so time has become one of their most valued commodities and what they do with their time is scrutinized more than ever before. As a result, when looking to purchase real estate, time and convenience are more heavily weighed into the buying equation than decades past. Not from the standpoint of how long it takes to look at, put under contract and close on a property, but from the standpoint of how much time can be dedicated to making the home the way a buyer wants it. Personalizing a home takes time and when time is in limited supply buyers have been opting for the newer house and development, even if it is quite a bit further from the beach.
Because of the rise in popularity of home TV shows, more of today’s buyers are better educated and know what they want the interior to resemble. With high demands on their time their first choice is to purchase a house with that look already. What this means is convenience and time have taken over location as the top priority for today’s buyer.
Real estate on Hilton Head Island has always sold in ‘waves’. What that means is segments of the market can stand idle for periods of time before they become such a phenomenal value the market cannot resist them any longer, despite buyer rationale. I predict the high end market on Hilton Head Island will pose such a tremendous value to buyers that they will start to reevaluate the allocation of their resources; i.e. time and convenience vs. money and location. Our upper end market has been idle for some time and is prime to catch its ‘wave’. As the market realizes the tremendous value this segment offers we will start to see the tide change and before you know it the ‘wave’ will be here. But…you have to be ready to take the ride. By this I mean you must be ready to take advantage of it. While part of my magic is asking better questions and finding you the answers, the other part is showing you how to take advantage of the opportunity.
For buyers - this means knowing which areas and properties allow for the greatest increases in value going forward. Where can you invest your time, money and effort and get the greatest return? That is where I come in. I follow, study and know these areas and which offer the best ROI. If you don't believe me ask yourself who else has offered as detailed explanation on what's happening in the market and where the next increase in price and value will come from?
For sellers - the above clearly illustrates I have a phenomenal understanding of what today's buyers are looking for. It allows me to help you to sell your property in the least amount of time while others are left scratching their heads. It's what allowed me to put under contract a $1.5M house TWICE in less than 14 months (the financing fell through on the first buyer) where others were having difficulty getting offers on theirs.
You have to know what it is you have before you can develop a plan for advertising and marketing and you have to understand who you are marketing to so you can explain to them the benefits of the item being sold, in this instance a house. There are few who understand it to the depths I do. My past clients understand this and if you're reading this hopefully you will as well.
QUESTION OF THE DAY: Why do you think the upper end market has seen a stall? Did you enjoy the article above? Please let us know your thoughts in the comments link below:
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1/30/2017 01:51:59 am
You make some great points. Pete. That excessive taxes on second homes negatively impacts housing values is much more than a "theory". The basic economic principle is that economic decisions are made based on total cost. This includes taxes and HOA fees. There are numerous examples of this. For example a flight of homeowners in the 70s and 80s from higher taxed New Jersey and New York. There was a lot of constellation and market impact a few years ago in Florida when property insurance premiums were increasing due to the costs of a really bad hurricane season. Property sales slowed dramatically Governments like Beaufort County are fooling themselves and their constituents into believing that the tax paying resident is getting a good deal by passing tax burdens to non-residents. The adage is true that "there no such thing as a free lunch (in this case government)". The resident pays through lower selling prices probably much more than they "save" in taxes. Consider two identical homes, one with a tax burden (and/or HOA fee or any required fee and assessment) that is double the other. Will one sell at a higher price than the other. Clearly not. They will both sell at the lowest of the two. In the Hilton Head/Bluffton market the difference can easily be $300K or more on a $1 million+ home. As you astutely point out, time and inconvenience are increasingly important factors in purchase decisions as well - so the implied cost is reflected in selling price. Likewise, as you note, information is readily available and easily accessible to all buyers. So buyers are far more aware of the differences among alternative purchase decisions. The market will favor the lesser cost alternatives after considering total cost. The point you make indirectly is that it is essential to also define the market properly. This has become a significant issue in the information age. It's very easy - and now common for - customers to electronically survey dozens of alternatives before keying in on one or a handful of the best. Paradoxically, communities that are ruled out will never know and never find out why without major research - the customer just doesn't show up. Hilton Head/Bluffton is not a market in a relevant economic sense. At best it is a small segment. The customer(s) determines the market not the community or government officials. The market is a sum of comparable alternatives. Each customer has a slightly different view of their market but collectively the customers definition of their market is quite broad.
11/14/2022 05:37:43 pm
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