Post-Season Wrap Up & Market Update | Hilton Head Island, SC

[Ron Williams]

As summer winds down, here’s a look at how things shaped up this season.

Most property managers reported occupancy rates being down by 10-12% year-to-date. August was hit the hardest, which makes sense given that many schools in the Southeast, particularly in Georgia and South Carolina, started classes around August 1—about two weeks earlier than usual. Despite the dip in occupancy, rates remained stable or even edged a bit higher compared to last year. On the retail and restaurant side, numbers followed a similar pattern, down by around 10-15% year-to-date. So, is this a sign of fewer people coming to Hilton Head or a broader reflection of the economy? I lean toward the latter—this is more about economic conditions and the lingering post-COVID effects. But it's important to note that rental and retail figures are still ahead of 2019 levels.

On the real estate front, prices are holding steady, though we’re seeing an increase in inventory. Homes are staying on the market a bit longer, and we’re starting to see some price reductions. That said, we’re still up around 5% year-to-date on the island. Condos, however, are where the biggest shifts are happening. Inventory is growing, and sellers are more motivated to move properties. I anticipate that late fall and early winter could present some good opportunities for those looking to pick up short-term rentals (STRs).

One thing to keep in mind, as with most markets right now, is that return on investment (ROI) isn't going to be sky-high. Today's prices aren't exactly investor-friendly, and typical returns hover around 6-8%. However, there are ways to improve those numbers. For instance, you can take advantage of accelerated depreciation, especially with STRs. And remember, even if you're just breaking even on a leveraged property, someone else is paying off your asset for you. This is the beauty of real estate—especially in resort areas or markets with above-average appreciation. Over time, that 6-8% return can grow to 15-20%, but the key is knowing how to leverage that equity at the right time.