REAL ESTATE REPORT
Well, we made it through the first half of 2006 without an obvious bursting of the real estate bubble that we all seem to worry so much about, thanks to economic predictions. Perhaps, though, we are seeing a slow leak or a gradual deflating.

In early 2006, Nariman Behravesh, chief economist of Global Insight, issued his "Top 10 Economic Predictions for 2006." One of these predictions was about the price of housing. "House prices will level off without crashing," Behravesh wrote for Global Insight's Web site. "So far, the British and Australian housing markets have cooled down without crashing. The same fate probably awaits the U.S. economy in 2006." Behravesh predicted collective home values would only rise by 3.5 percent this year and 1.9 percent in 2007. "Thus, the housing bubbles are likely to deflate without bursting," he concluded.

Another prediction was about Federal Reserve rates. "The Fed will keep tightening through the spring," Behravesh forecasted. "Global Insight predicts that the Fed will raise rates at least three more times between December and March, before taking a breather. This will leave the funds rate at 4.75 percent."

Apparently economists get paid for being right or wrong! Although, if the real estate market on Nantucket is any kind of economic indicator, they must be earning those paychecks. Let's look at what the statistics say:

To date in 2006, through June, there have been fewer overall property transfers than there were at this point in 2005 (down 24 percent), but the dollar volume of those transfers on average (if you take out the $70 million Nantucket Island Resorts paid for various properties around town and the $13 million Westmoor Farm sale [now the tennis club] is up from this point in 2005 - up 8 percent.

The average home sale, based on all transactions for the first half of 2006, stands at $2,307,000 - up seven percent from all of 2005, but up 24 percent versus the first half of 2005, and the median home sale is creeping higher as well at $1,550,000 - up 4 percent from all of 2005 and 15 percent versus the first half of 2005. 149 homes have sold in the first half of 2006 for a total of $344 million, which is less than half of the 398 homes which sold in all of 2005 and about a third of the 468 homes that sold in 2004. At this pace, 2006 will not be Nantucket's third billion dollar real estate year in a row.

Vacant land continues to set its own tone. For the first half of 2006, the average vacant land sale stood at a whopping $2,093,000, up 76 percent above the average vacant land sale in 2005 and the median vacant land sale stood at $1,000,000, up 43 percent above the median vacant land sale in 2005.

Prices seem to continue to rise at the upper end of the market. In the first half of 2005, there was only 1 sale over $10 million. The first half of 2006 has seen four sales over $10 million, with the top sale being $18,250,000. You think that's pricey, according to Forbes magazine, the top five most expensive properties currently listed for sale in America range from $60 million to $125 million and none of them are on Nantucket!

A rather unfortunate statistic that goes along with this is that only six percent of the housing market on Nantucket in 2006 is below $1 million. Whereas, as recently as 2004 it was 12 percent and 2002 it was 24 percent. This is a sort of reverse indication of the upper-end of the market pulling the socalled affordable stuff up by the bootstraps.

So, what does this all mean? With fewer homes being sold, but the amount of money they are selling for still going up, are there fewer buyers just spending more because there are fewer available properties?

Well, not exactly.

Currently there are nearly 500 homes on the market, a figure which has been rising steadily all year. On average, the amount time these properties are taking to sell is slowly increasing (now averaging eight months), with the average sale taking place at only 92 percent of its listing price. An interesting figure in itself, because during Nantucket's busiest real estate years the average sale took place at 95 percent or more of its listing price and during some of the slowest years, the average sale took place at 90 percent or less of its listing price.

There were only 77 single-family building permits issued in the first half of 2006, making an annualized rate of 144 permits for 2006, far fewer (a 32 percent drop) than the 212 issued in 2005. If this slower trend of new home construction continues, it would make 2006 the slowest new building permit year in the last ten years.

So, how are the predictions for 2006 panning out? Well, Nantucket as usual is outpacing the national average. However, despite the warm temperatures, it appears as if the Nantucket real estate waters are cooling somewhat or at least the waves are getting calmer or maybe the tide is ebbing slightly?

With a tightening of the national economy in general, higher interest rates, high oil and gas prices and a general spike in the cost of living associated with these, people's money is more being used on getting from here to there (or vice versa) than on

buying a home on Nantucket. Although once a home is bought, more money is paid for it!

Stay tuned! There is still hope for those market watchers out there who like seeing Nantucket real estate set records for itself year after year. September and October are typically very busy months for real estate transactions on Nantucket, as properties that went under contract in spring and summer finally close.

Oldest son of H. Flint Ranney (the guy who normally writes this article), a student of the current real estate market, and a licensed real estate salesperson since 1987, Rob has been performing real estate appraisals with Denby Real Estate, Inc., as a field appraiser and tracking market statistics under his father's mentorship since 1996.

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