Market has reached unprecedented highs
How the island’s real estate market has risen, dipped and surged to new heights in over three decades
By Mary Lancaster
Independent Writer

First in a series

The price for a modest three-bedroom home on Nantucket has lurched from under $50,000 in 1970 to more than $1 million in 2005.

As the total for real estate sales reached an all-time high last year in excess of $1 billion, the number of residents cashing out and moving to less expensive communities also increased. Approximately 89 percent of island properties are now owned by off-island taxpayers.

Considering the cost to purchase a home or what is left of vacant house lots, who are these buyers and how much do they have to earn to be one? Where do they come from and why do they want to be here? What made this happen? And, perhaps most importantly, how has Nantucket’s real estate market affected renters, young families, and the overall quality of island life?

Reaching the crescendo

From the mid-1800s, Nantucket began drawing the wealthy to relax here away from city life. Soon after came actors flocking to quaint ‘Sconset and its casino stage, and artists relishing the island’s pure light and magnificent landscapes.

In those first years and for almost another century and a half, Nantucket had just a smattering of quality restaurants and upscale clothing shops, being mostly represented by working docks, utilitarian stores and unassuming people who toiled hard for their paychecks and shunned publicity or pomp.

That unpretentious portrait slowly began to fade in the 1960s, when it became apparent that selling island properties and the employment generated by real estate transactions would well surpass Nantucket’s income from tourism and fishing.

Some say it started with Walter Beinecke, who bought, razed and renovated the wharves where draggers once tied up to unload daily catches and simple, ramshackle shanties lined the inner basin. When he was finished, the new waterfront was neat and alluring to the owners of luxury yachts and finely crafted sailboats.

But land was cheap, and there was plenty of it. Houses, even stylish ones in choice locations, were affordable. A local paper featured an article enticing off islanders to build or buy, stating: “We are glad they come, for it is our sole source of revenue...Why not look around the island and see if there isn’t a house just meant for you?”

Around 1970, the island began to see an influx of young people who realized that the hustle and anonymity of urban living was not for them.

They moved to Nantucket in large numbers, opening small businesses and padding the labor force that served an increasing population of vacationers. They took advantage of that era’s healthy, reasonable rental market while the well-to-do, but not then super-rich visitors, saw opportunity and seized it when open land, construction costs and houses were well within their means.

Nantucket was the place to be, and a nice three-bedroom home in the 1970s could typically be had for $45,000 to $85,000. Today, 80 percent of the 377 houses on the market are listed for well over $1 million.

Denby Real Estate owner Flint Ranney’s data shows that the cheapest residence available now is a two-bedroom condo for $450,000, with the top property being a Monomoy waterfront home for $19,950,000.

The number of real estate offices has grown from a half-dozen in the late 1970s to more than 30, represented by some 250 brokers.

Economy driven market

But the island’s real estate business has not been on a steady climb for the last three decades. Ranney and others point out that it is a cyclical market that generally reaches a peak every 15 or 20 years, then drops and rises slowly.

He explained that when the Nantucket Association of Real Estate Brokers formed in 1980 and exclusive listings gave way to shared information, sales accelerated from wider exposure.

Nantucket Land Bank property transfer statistics compiled since the NLB was founded in 1984 show an apex in 1986, when 1,185 transactions occurred at an average price of $231,418 and carried a gross value of $274,230,863.

That was followed by a recession, in part due to the savings and loan crisis when banks foreclosed on properties right and left until the economy began to improve again in the early 1990s. During the downturn, prices dropped approximately 40 percent for houses and 50 percent for land.

In 1993, prices started to creep up by roughly two percent, then 18 percent in 1994. By 1997, though there were only 670 transactions, they averaged $471,431 with a gross value of $315,858,854. For the past decade costs have jumped every year by 10 to 15 percent. Land Bank figures for 2004 show 776 transactions at an average price of $1,373,737 and gross value of $1,066,019,958. For the first five months of this year there have been already been 266 sales at an average of $1,441,102 and gross value of $383,333,188.

“We’re near the top now, but Nantucket is a unique place so it’s hard to say if we are really near the top or not,” said Ranney. “There is not a lot of buildable land left, there is still a lot of demand compared to the supply and there are people with $20 million who can come here and buy.”

Along with Ranney, Hamilton Heard and J. Pepper Frazier, Sr., was among the few early agents.

“I created this market, actually. I went around saying everything is underpriced — it’s my fault,” Frazier said, partly in jest. “It’s just a larger audience [now]. We all get fed up with Nantucket, but if you look around, what’s better? And as affluent buyers arrived, people started buying bigger pieces of land. We have an airport where nearly any private plane can land and the restaurant scene improved. It just got discovered.”

In 1979, the Nantucket Planning and Economic Development Commission reported on visitors’ growing attraction to the island and changes evidenced since 1960, such as sub-divided lots increasing from 48 to 557, meals sales skyrocketing from $4.8 million in 1975 to $10.5 million in 1979, and a 19 percent rise in taxable cars from 5,319 in 1970 to 6,332 nine years later.

Are the cycles over?

The numbers have, in general, continued to climb. Approximately 5,000 houses have been built within the past 30 years, and according to Ranney, are mostly owned by summer residents.

Whether involving newly constructed or existing homes, the real estate boom on Nantucket is clearly shown in the hike from $119 million in total sales for 1985 to a record $1 billion for 2004.

Buildable lot prices peaked in 1989 at an average of $226,000 compared to the 2004 average of $787,000. In 1989, the average dwelling price was $504,000 next to $1,632,000 last year.

“For the last five years the real estate market has been driven by Nantucket Golf Club,” said Frazier. “Golf is not a game, it’s an obsession. These super heavy hitters were saying ‘I’m not going to Nantucket if I can’t play golf.’ Now, you just plop down your money and you’re in.

“The old-line Yankees aren’t as plentiful as they used to be,” Frazier continued. “Bostonians are still here, but the New York and Washington influence is being felt and there is a pretty good San Francisco group here, a lot of people who have made a lot of money. There doesn’t seem to be any signs of a slow down now. I’m becoming jaded — if [a property] is only $10 million I wonder why it’s so low.”

In Heard’s opinion, the island real estate market will never see another low cycle because of the simple equation of supply and demand. Heard said there are only 45 buildable empty house lots on the real estate listing service.

“When they’re gone, they’re gone,” said Heard. “The alternative is buying a house, tearing it down and replacing it with a house that is more pleasing to the owner. There is less and less supply and there is still a demand. Coming to Nantucket is special.”