This three-bedroom home on Nantucket was listed for sale at $695,000 by Denby Real Estate at the beginning of July. The home is currently under agreement.
The slowing economy appears to be putting a damper on home sales in several parts of the Bay State. Single-family home sales slipped in at least five counties in Massachusetts during the first half of the year, particularly in Nantucket, which had 43 percent fewer sales during the first seven months of the year compared to the same period last year.
According to Warren Information Services, Banker & Tradesman’s sister company, 72 single-family homes were sold in Nantucket from January to July of this year, compared to 127 during the first seven months of last year.
However, Nantucket home prices, as in most parts of Massachusetts, continued to climb. The median sales price for a single-family during last year’s first seven months was $675,000, compared to $795,000 this year, representing roughly an 18 percent increase. WIS tracks all sales on the island through the registry of deeds, matching sales records to assessors’ records to pinpoint property use such as single-family residences.
According to Nantucket real estate agents, the lower sales numbers reflect consumer caution and general uneasiness about the sliding stock market and softening economy.
“I think people are nervous about the economy and about the stock market,” said Melinda Vallett, a broker with Denby Real Estate in Nantucket. “If the numbers are down, it’s because the [stock] market is off.”
Denby Real Estate sold almost $261 million worth of property from January to the beginning of August this year, Vallett said.
With more than half of the year already gone by, Denby is on course to handle only 70 percent of the dollar volume the company had last year, when there were $628 million worth of transactions.
While Vallett maintains that she has not seen a tremendous slowdown at Denby, she said other brokers on the island have told her they’ve been affected more. And Vallett acknowledged that she has noticed more hesitancy among homebuyers.
“Last year, if they found a house of their dreams, they just bought it,” Vallett said. “What’s happening now is I’m hearing from buyers that they’re going to wait and see.”
With the average price of a Nantucket home well over $1 million, homebuyers often felt they were overpaying in the past but if they found a house they loved, they would buy it, Vallett said.
Even today, Vallett said she has sold some homes recently within a 24-hour period after they were placed on the market. But since many homebuyers on the island are tied into the stock market, many of them are waiting to see if their investments recover and if the asking prices come down.
“Will prices come down? I don’t know,” said Vallett, who has worked in the Nantucket real estate business for 12 years. “But I’ve never heard that [wait-and-see approach coming from buyers] before.”
Vallett said she does not believe that a low housing supply has led to fewer home sales this year. There were 379 houses and 97 pieces of land on the market last week. The average asking price for the homes was about $1.9 million, Vallett said.
According to WIS data, there were also fewer sales involving properties costing $1 million or more. On the island overall, 63 properties in the $1 million-plus category, with a median sales price of $2.8 million, sold during the first half of 2001.
That is 24 fewer properties, or 38 percent less, than the 87 properties sold during the first half of last year. However, the median sales price of the $1 million-plus properties a year ago was about $700,000 less, or $2.1 million.
Period of Caution
What are the reasons for the decrease in sales?
Penny Dey, vice president and a broker at Congdon & Coleman Real Estate in Nantucket, said it has to do a lot with the fact that the island’s housing market is “discretionary.”
Buyers searching on Nantucket are usually looking for a second or third home – something that can more easily be cut out when facing budget constraints.
“[It’s] expensive real estate. No one has to have a property on Nantucket. It’s discretionary,” said Dey.
Dey cites comparable sales statistics collected by the Nantucket Association of Real Estate Brokers. The total number of sales transactions is down 27 percent for the first seven months of the year, according to the statistics compiled by NAREB, which operates the region’s multiple listing system.
Dey said that NAREB’s statistics include residential, commercial and vacant land sales that are entered on the MLS. Out of 276 transactions that were recorded through July of this year, only six were for commercial property. Only 13 were properties that sold between $225,000 and $400,000; 48 were transactions for $1 million or more and 30 were $2 million-plus transactions.
Despite the phenomenal rise in real estate prices, some real estate professionals said they are starting to see more buyer resistance to higher home prices. Homes are now on the market an average of nine months, about a month longer than last year.
As a result, Dey said more sellers are dropping asking prices.
For the last seven years, buyers have paid between 90 and 95 percent of the listing price, said Dey, citing NAREB data. Now, the average sales price is 85 percent of the listing price, she said.
“It means that sellers are more aggressively pricing homes than the market will support,” Dey said.
Dey provided two examples of sellers who have recently decided to lower prices. The owner a 3.6-acre piece of land with spectacular views of the harbor, which was on the market for a year, recently reduced the asking price from around $3 million to $2.4 million. And in town, a five-bedroom, four-bath newly constructed home that was originally listed at $2.1 million is now selling for $1.8 million.
Dey doesn’t necessarily view the sales slide as a detriment for Nantucket.
“I don’t think a slowdown is bad for the community,” said Dey. “I think it’s [prices] become so accelerated … Anyone who is [part of] a working family can’t afford to buy here.”
The high prices have other implications for the service industry in this trendy and popular vacation spot.
Many shop, restaurant and other service workers can’t afford to buy or rent on the island, creating headaches for business owners looking to fill open slots during the busy summer months. Some business owners scramble to find housing for seasonal employees.
With all these issues looming in the background, what will the future hold for Nantucket?
“I think it’s going to be a period of caution,” Dey said. “People are not going to rush into things.”
