Nantucket Real Estate Agent Blog

Nantucket Real Estate Market thoughts on where we are, and where we are going.  Nancy Miller was published in Fortune Magazine today. She wrote a very insightful article about Nantucket and foreclosures. I thought it would be prudent for a follow up, since I have been a student, and active real estate agent in the Nantucket Real Estate market for the last 14 years.

Basically there are 2 real estate markets on Nantucket, year round community and the summer seasonal community.  The year round community and real estate prices have suffered the most and I am guessing will continue to a little longer (8 to 15 months).  In this year round market property on island is valued around or below $800,000.  It is these homes that we have seen the most activity in the foreclosure market. These are the properties that the auctions have actually happened and workouts with banks have not been completed. Having said that there have been a handful of foreclosures in higher priced “vacation” market as well.  There were 5 properties I can think of that belonged to 2 different gentlemen who were playing the speculation game and got way to over extended, just those 5 properties and 2 home owners make up 20% of all the island foreclosures. There was one very nice home that sold over $5,000,000 in foreclosure; the man who lost the home was not one of the previously mentioned two men.  Most properties that have been noticed in the newspaper for foreclosure don’t end up happening, often some sort of workout ends up taking place.  Most of the second home market has the resources from somewhere to work things out.

Please allow me to show you what has happened and how we got here.  I stopped into the building department the other day and got a copy of building permits that have been issued in the last 10 years.  In the boom real estate and construction years of 03 through 2007 a lot of new homes were built on Nantucket, in that time there were at total of 870 new homes built on Island.  Since 2007 the numbers have been dropping rapidly. Last year there were just 43 new homes constructed.  Another data point worth considering is renovation to existing structures. These numbers have stayed relatively consistent even in the economic downturn. Like many communities, the year round community on Nantucket is a trade driven. The drop in work as represented in the single family permits has significantly affected the economics of the year round community and the value of that real estate - thus leading to foreclosures in that market.  On the other side of the coin the reduction in permits and available lots for building as represented in the decline of single family permits from 06 to now (even prior to the economic downturn) give us another angle to view the market. Land scarcity. 

To fully understand land scarcity in one of the most constrained markets anywhere we should also consider conservation.  The Nantucket Land Bank and the Nantucket Conservation Foundation along with a few other conservation groups already own over 50% of the land on Nantucket protected to be forever wild. I consider this our most charming and valuable asset.  Approx 42% of Nantucket is developed, the remaining 8% or so is not and is a race between conservation groups and people wanting summer homes, simple supply demand economics show us prices will continue to go up here on island.  

In July 2010 we have been seeing strong sales activity in arms length transactions in the $2m to $20 range, I believe this is the case because many buyers chose to wait out the market in 08 and 09 to see what would happen in the overall economy.  Prices have corrected on Nantucket in both vacation and year round markets and buyers are seeing value. They are choosing to get back into assets that are tangible and they can physically enjoy and where they will see long term appreciation.  

I have a client who is very well versed in real estate, he works in markets globally, he once said that this market makes no sense, if fits no model, and can’t be tracked. After doing this for 14 years, year round 7 days a week I get it.  Now I really get now because my wife and I are having a baby in two months and when I look around the streets what I see is family, safety, memories and tangible moments that are priceless.  I understand what truly drives the Nantucket real estate market.  As much as real estate is driven by economics it is really driven by emotion and the moments of enjoying ones respective success with those they love in a place they love.  (Sappy I know, but its true).

I will look forward to your comments.

Brian