Island builders see niche for lower-priced housing -- under $400,000

February 18, 2008 

Nearly 100 new homes are planned along a short stretch of Gumtree Road on Hilton Head Island, but there's a twist -- most of them will fall somewhere in the $300,000 to $400,000 price range, making the homes fall into the "affordable" category on the island.

Bluffton-based Sunset Communities is preparing to build model houses for its 80-home, 25-acre Carolina Isles development. Just down the road, 16-home Hanahan Place is halfway built, and eight-home Woodpecker Place will start when Hanahan is done, according to builder Model Homes of Hilton Head.

In addition, there's still some room in nearby Allenwood, which is almost built out, making the Gumtree Road area one of the few places on the island where there is a concentration of lower-priced homes, according to town and real estate officials.

Todd Hawk, owner of Sunset, which is building Carolina Isles, expects it will take a little more than two years to build out the Carolina Isles development.

Carolina Isles will start sales March 1; the first models should be finished by June, he said.

Despite a housing market that has seen sales declines over the last two years, he's optimistic the new development will take off.

He expects interest rates to continue to fall, stimulating buying. He also believes that single-family homes with garages starting in the $300,000 to $400,000 range will generate plenty of interest. "The price points are going to be so attractive on the island," Hawk said.

The $300,000 to $400,000 range for a three-bedroom, two-bath house is at the low end of the island real estate market.

Last year, throughout the area served by The Multiple Listing Service of Hilton Head Island, which includes Beaufort and Jasper counties as well as some listings in nearby counties, the average area home price was $582,926.

Houses that sell for less than $400,000 are in demand on the island, said Linda Palmer, a Realtor with Keller Williams Realty and president of the Hilton Head Area Association of Realtors.

"A lot of people want to live on the island," she said. "It gives some the opportunity to stay closer to work."

Single-family homes in the under-$400,000 price range make up just a small percentage of the overall housing stock and tend to sell quickly, Palmer said.

The lack of housing at that price has led a lot of families to buy on the mainland. That shift is part of the reason Gateway Realty, which specializes in mainland sales, saw a record year in 2007, said Tom Jackson, Gateway's broker-in-charge and the next president of the Realtors association.

Model Homes of Hilton Head, which is building the 16-home Hanahan and eight-home Woodpecker, has seen a lot of interest in homes that cost between $325,000 and $369,000, said Bryan Jacoby, director of development and construction for the company.

Nine of the 16 lots in Hanahan have been built on since the community started a year ago, Jacoby said.

The only thing slowing down the project is working families from the mainland looking to move to the island find it takes time to sell their mainland properties, Jacoby said.

Island Mayor Tom Peeples said he's "very happy to see" more lower-priced homes on Hilton Head.

A combination of the town's sewer expansion efforts and zoning that allows for more housing units per acre may have helped spur some of the building in the Gumtree area, Peeples said.

Developers are just doing what the market wants; there are no town incentives to build the homes, Peeples said.

But as attractive as a $350,000 home might seem, it's still out of reach for many Lowcountry professionals, said Joan Mustard, executive director of the Lowcountry Community Development Corporation. Her organization offers classes for first-time homeowners and helps them secure grants toward housing payments.

Of the 10 homebuyers the group has helped since the summer, the most expensive house purchased was $179,000, Mustard said.

The grants have restrictions on how much someone can earn -- roughly $35,000 per year for one person or around $50,000 for a family of four.

But the rule of thumb is that a mortgage shouldn't be for more than 2-1/2 times a household's annual income, meaning a $350,000 home requires income well above $100,000 annually, Mustard said.

That means folks like teachers, nurses and firefighters still are priced out of a market that starts in the low $300,000s, she said.

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