This newly built home in Shimmo on Nantucket features seven bedrooms and a two-bedroom guest house. It’s currently being offered for sale with an asking price of $9.65 million.
Massachusetts’ swanky vacation spots may be getting a bit more exclusive.
Martha’s Vineyard and Nantucket – which draw thousands of affluent vacationers every summer – have seen home prices escalate this year.
Nantucket’s median price for single-family homes sold through May of this year rose to nearly $1.6 million, a 9 percent jump from a year earlier. In the same time, the number of home sales on the island plunged almost 30 percent, according to Banker & Tradesman’s parent company, The Warren Group.
On Martha’s Vineyard, prices climbed 2.7 percent to $647,000 from $630,000 during the first five months of the year, while single-family home sales rose 13 percent.
Realtors say prices on the islands tend to be inflated because the residential real estate market is driven primarily by second-home buyers and sellers, a good number of whom are wealthy. That has helped the markets remain somewhat insulated from housing slump on the Massachusetts mainland.
“It’s a discretionary market,” said Margaret Steele, owner of Harborside Realty in Edgartown. “The buyers in general don’t have to buy. For most of them it’s a second home and the sellers of those second homes can either rent or the family will use it. That kind of keeps our prices a little artificially high.”
Sharon Smith Purdy, president of Sandpiper Realty in Edgartown, isn’t surprised that prices were up. Unlike homeowners in other parts of the state that must sell because of a job or lifestyle change, sellers on the island don’t feel the same type of pressure.
“The sellers are by and large an affluent community. They have no need to sell so the majority of our sellers are positioned to hold their prices,” she said. “We have a situation, where the sellers are not giving in because they don’t have to sell, that is very different from any other communities. I think that has a lot to do with why our prices have held.”
A total of 121 single-family homes were sold in Dukes County – almost all in the six towns scattered across Martha’s Vineyard – from January through May of this year, up from 107 sales during the same months in 2006. Nantucket homes sales, in contrast, fell to 62 from 88 a year earlier.
Buyers are finding more properties available for sale on both islands, according to local Realtors. There were 642 properties listed for sale on Martha’s Vineyard as of last week, up from about 570 during the same period last year, according to information provided by Sandpiper Realty.
About 60 percent of the properties currently on the market, or 381 listings, are priced under $1 million.
“The weaker segment of the market is definitely under $1 million. That’s where the largest supply is,” said Purdy.
Over 500 properties were listed for sale on Nantucket in June compared to 445 a year earlier, according to information from the LINK Nantucket. Most of the properties currently listed for sale are priced between $1 million and $4 million.
Sellers are becoming more realistic about pricing and buyers are feeling less urgency, according to Penny Dey, president of the Nantucket Association of Real Estate Brokers.
Properties on average are selling for nearly 93 percent of the asking price, up from last year when all properties sold for an average of 91 percent, said Dey, co-owner of Atlantic East Real Estate. That reflects sellers who are “pricing more correctly to the market,” explained Dey.
But even though buyers might have more choice they aren’t finding huge bargains. “I wouldn’t say prices are favoring buyers yet,” Dey said.
Nantucket prices have risen steadily over the last three years. The median selling price for a single-family home exceeded $1.48 million last year, a 33 percent increase from the $1.12 million median recorded in 2004.
In Dukes County, the median price reached $635,000 last year, a 14 percent increase from 2004. But last year’s median was 2.3 percent lower than 2005, when the median price was $650,000.
Motivated home sellers on Martha’s Vineyard have been adjusting prices more frequently than they did two years ago, according to Steele. Steele’s firm recently marketed a home in Oaks Bluff that was originally listed for $550,000 and was reduced to under $500,000.
“Now it’s under agreement in the mid-$400,000s,” said Steele.
Mainland Morass
The price increases on the islands are a sharp contrast to what’s happening statewide. The median price for single-family homes sold through May of this year dipped nearly 4 percent to $313,000 from $325,000 a year earlier
A total of 19,445 single-family homes were sold from January through May, a 3 percent decline from the same months last year.
Meanwhile, the median price for condominium units sold through May of this year eased 2.5 percent to $268,000 from $275,000. A total of 11,244 condos were sold statewide during the first five months of the year, a 3.5 percent decline from the 11,656 condos that were sold during the same period in 2006.
“Sales have declined not because there aren’t buyers out there. The buyers are low-balling and sellers are resisting lowering their prices, so there’s a standoff and the result is you don’t get deals done,” said Karl Case, an economist and Wellesley College professor.
Case said home prices are “sticking” and there hasn’t been a steep drop in overall prices because the economy remains fairly strong.
The housing market could suffer a deeper downslide if there is a spike in mortgage interest rates and the economy sinks into a recession, according to Case.
“If we have a big rate spike or economic recession we will see prices crack,” predicted Case.
Henry O. Pollakowski, director of the Housing Affordability Initiative at the MIT Center for Real Estate, agreed. “If there were a major slump in the economy that would not help, but it doesn’t look like that’s on the horizon,” he said.
As long as the economy holds steady and mortgage interest rates don’t jump significantly, Case said he anticipates that sales will rebound and prices will stabilize by year’s end.
Still, Case warned that the housing market woes could drag down the overall economy. Housing production and starts are off from last year, which has an effect on employment. Meanwhile, a loss in property values can affect consumer spending and the fallout from the subprime loan market is leading to more foreclosure and auction activity.
“Put them all together and they’re a big drag on the economy,” he said.
