We have had some good news recently as it relates to interest rates.  This has a very positive effect on real estate values; lower interest rates means you can buy more property because your payments are less. 

The Most Important Thing is Inventory

The thing that affects real estate values the most is not interest rates, but inventory.  The higher the inventory, the less chance you have of property values increasing.  Unfortunately right now, Hilton Head Island is experiencing high inventory in almost all price levels.  It makes common sense and economics 101 tells us that supply and demand affect pricing and right now we are in a situation where the inventory is putting pressure on pricing.

Good News for Buyers

Obviously this is good news for buyers because they have a large selection of good properties at good prices.  There is a silver lining in every dark cloud. 

Historically, 6-months inventory has been the base line – in other words, prices increase as inventory dips below 6-month and prices decrease as inventory goes above 6-month inventory.  The larger the inventory the larger the decrease.  The smaller the inventory the larger the increase.  In April of 2005 we had a 1-month inventory and prices were going up 25% per year. 

It is my hope that after the first of the year sales will increase and inventory will start decreasing and we will get back to a more normal market.  The last 60 days have been the worst market I have seen in my 27 years of real estate on Hilton Head Island.